It is hard to save for retirement when you are just starting out. Maybe you have student loans you are struggling to pay off. Maybe you are saving up for a wedding or a house, or supporting a young family. Maybe you are not making very much money to begin with.

All these individual reasons for saving less add up to a lot of young investors who could be saving more. Our data shows that the majority of investors in their 20s and 30s are not saving as much as they could in their 401(k) accounts. More than half of investors in their 50s or older are on track to make the maximum possible contribution to their 401(k) accounts this year, but only 1 in 5 investors in their 20s are set to do the same.

If these young investors save more in their 20s and 30s, they will reap huge rewards. Every dollar saved when you’re young has more time to compound and grow—making it far more valuable than a dollar saved down the road.

Even if they are struggling to save a lot, these young investors do have one advantage over their elders; they are paying less in fees. Investors under 30 pay a median 0.07% in fees, while investors in their 30s pay 0.10%, investors in their 40s pay 0.15%, and investors over 50 pay a median 0.17%. Just as early savings pay off big down the line, over the course of working life, even small differences in the fees you pay on your investments can add up to hundreds of thousands of dollars in lost savings.


If you cannot afford to save much, then you certainly cannot afford to overpay for your investment options. Our data shows that more expensive investment options do not outperform cheaper options over the long term. In fact, the research shows that the cheapest investments will give you a greater total return in the long term.

The millennial investors who are choosing cheap funds for their 401(k)s are making the smartest possible choice with the limited amount of money they have available—something older investors could learn from.

Still, no matter how smart you are about investing, there is no substitute for starting your saving early and taking a moment to reevaluate how much you can actually afford to save. Consider putting an anticipated bonus or raise straight into your retirement account, or adjusting your tax withholding so that you’re taking less money out of your paycheck to pay the government, and more to pay your future self. A small change now could be worth a lot of money later.

Sarah Morgan

Sarah Morgan is a freelance writer and editor based in Brooklyn. Her work has appeared on and in the Wall Street Journal.