Retirement Investment Tips Every Young Adult Should Know About

April 24, 2023
5 min read

Investing for Retirement: The Best Options for Young Adults

Retirement Investment Tips Every Young Adult Should Know About

Many young adults today find themselves in the same predicament. They want to start investing for retirement but don't have enough money. The good news is there are several options available for those with limited funds. The earlier you start investing for retirement, the better. Compound interest allows your money to increase significantly over time.

However, with so many options available, it can be tough to know where to start. We've compiled a list of the best retirement investment options for young adults to help get you started. Here are eight investment options you can choose from:

1. Employer-sponsored retirement plans

Investing in an employer-sponsored retirement plan is a great way to save for the future. Many employers offer 401(k) or 403(b) plans tax advantages and include employer-matching contributions. Employer-sponsored retirement plans are doubly beneficial because they offer workers tax breaks and employer-matching funds.

Thus, with an employer-sponsored retirement plan, not only can you save money on your taxes, but your employer will also contribute extra funds to help you save even more for retirement. An employer-sponsored retirement plan should be atop your list of options if you're searching for a way to set aside money for later.

2. Traditional IRA

A traditional IRA is a popular investment option for those saving for retirement. Contributions are before-tax dollars, and the money grows tax-deferred until you withdraw it in retirement. This can provide a significant tax break, especially if you're in a high tax bracket.

Traditional IRAs also offer flexibility in how you can use your money in retirement. You can take periodic withdrawals, or you can leave the money invested and let it continue to grow. There are also no required minimum distributions, so you can keep the money invested for as long as you want.

However, there are some drawbacks to a traditional IRA. Contributions are capped at a relatively low amount, and there's a 10% penalty for early withdrawals. Overall, a traditional IRA can be a great way to save for retirement, but it's crucial to understand the pros and cons before making a decision.

3. Roth IRA

When it comes to saving for retirement, there are several different investment options to choose from. One option is a Roth IRA. A Roth IRA is similar to a traditional IRA, but your contributions are made with after-tax dollars. This means you won't get a tax break on your contributions, but your withdrawals will be tax-free.

Because of this, a Roth IRA can be a good option for people who expect to be in a higher tax bracket in retirement than they are now. It's also worth noting that there are no income limits for contributing to a Roth IRA, whereas there are limits for traditional IRAs.

Roth IRA may be worth considering if you're looking for an investment option to provide tax-free growth and withdrawals in retirement.


A SEP IRA is a retirement savings plan for self-employed individuals and small business owners. It works like a traditional IRA, but the contribution limits are higher, making it a good investment option for those with a high income. A SEP IRA allows you to contribute up to 25% of your income annually, up to a maximum of $56,000. This makes it an ideal way to save for retirement if you have a high income.

In addition, the money in your SEP IRA can be invested in a wide variety of investment options, giving you the flexibility to grow your retirement savings.

5. 529 Plan

A 529 plan is a tax-advantaged investment option to save for college or other qualified educational expenses. Contributions to a 529 plan are not deductible, but earnings grow tax-deferred, and withdrawals are tax-free as long as they're for qualifying expenses.

In addition, some states offer tax breaks for contributions to a 529 plan. As a result, a 529 plan can be an excellent way to save for future educational expenses.

6. Health Savings Account

A health savings account (HSA) is a tax-advantaged account that can be used to pay for qualifying medical expenses. HSAs are available to those with a high-deductible health insurance plan, and they offer a triple tax benefit: contributions are tax-deductible, earnings grow tax-deferred, and withdrawals are tax-free as long as they're used for qualifying expenses.

7. Individual 401(k)

An individual 401(k) is a retirement savings plan available to self-employed individuals and small business owners. It works like a traditional 401(k), but the contribution limits are higher, making it a good investment option for those with a high income.

The annual contribution limit for an individual 401(k) is $19,000, and employees can contribute an additional $6,000 if they are aged 50 or over. This is significantly higher than the $6,000 limit for traditional 401(k)s. Individual 401(k)s also offer other benefits, such as making catch-up contributions and taking out loans against the account.

For self-employed individuals and small business owners, an individual 401(k) can be a valuable tool for saving for retirement.

8. Roth 401(k)

A Roth 401(k) is similar to a traditional 401(k). But your contributions for Roth 401(k) are with after-tax dollars. The Roth option can be a good investment choice if you think you'll be in a higher tax bracket when you retire or if you want the flexibility of having tax-free income. With a traditional 401(k), you're locked into the same tax rate when you withdraw the money in retirement.

In Roth, you will save on taxes down the road. However, it's important to remember that Roth contributions are subject to the same investment risks as traditional 401(k)s. Do your research and choose an investment option that's right for you.

Enjoy Your Golden Years

No matter what you choose, the important thing is to start saving for retirement as early as possible. The earlier you start, the more time your money has to grow through compound interest. And the more money you have for retirement, the more financial security on your golden years.

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