How to Start a Retirement Fund
7 Min Read | Last updated: July 10, 2026
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Saving for retirement as soon as possible is important. Learn why and explore how to get started with the most common retirement funds.
At-A-Glance
- Funding your retirement often starts with opening a retirement account, such as a 401(k) through your employer or an Individual Retirement Account (IRA) on your own.
- Opening your retirement fund as early as possible and making regular contributions is a great move for your financial future.
- 401(k)s and IRAs are investments that carry risk (like losing money during market downturns) and rewards (like compounding interest and tax benefits), so they require careful consideration and attention.
If someone asked you today what you want to be when you grow up, you might be tempted to say “retired.” But even if you don’t plan to retire soon, starting a retirement fund as early as possible is important.
Retirement funds work by investing your money in different asset classes (like mutual funds, bonds, or stocks) that can help you grow your holdings over time. Let’s explore why saving early for retirement is important, different types of retirement plans, and how to get started.
Why Should You Start a Retirement Fund?
Starting a retirement fund can help you enjoy the life you build after your career ends by:
- Helping Fund Your Everyday Expenses
A retirement fund helps you make ends meet when you’re no longer working.
- Helping Your Money Grow Faster
Unlike putting money in a traditional savings account or stuffing cash away, a retirement fund accrues interest when the market does well, letting your money grow faster.
- Helping Protect Against Uncertainty
Social Security payments could be reduced one day, so savings can help you in an uncertain future.
When Should You Start a Retirement Fund?
Retirement funds are investment accounts that can help your money grow over time. The sooner you start saving for retirement, the better. Plus, the earlier you start, the more time you have to recover from riskier investments, underperforming markets, and uncertain economic periods.
Depositing any amount in a retirement account is a good start, and setting aside money every week can help you form solid saving habits. Setting up automatic withdrawals can also simplify your saving. And if your income increases over time, you might find you’ll be able to save more.
Choosing a Retirement Fund
Common retirement plans, like a 401(k) or an Individual Retirement Account (IRA), tend to offer tax benefits, but each can serve certain situations better, and both require consideration. The simplest way to differentiate between them is that 401(k) funds are typically employer-sponsored, and IRAs are not.
What Is a 401(k)?
A 401(k) is one type of employer-sponsored, tax-advantaged retirement fund that lets you contribute a portion of your paycheck to it. Employers typically offer 401(k)s to employees as an added benefit, and they may even agree to match your contributions up to a certain amount. You can even automate contributions to come out of your paycheck regularly. Perhaps best of all, employees generally always own whatever they deposit, no matter how long or little they’ve been contributing.
Depending on what your employer offers, you may be able to opt for one or both types of a 401(k) plan:
- Traditional
You contribute pre-tax income and only pay taxes once you start withdrawing.
- Roth
You contribute post-tax income for tax-free withdrawals in retirement.
What’s an IRA?
An Individual Retirement Account (IRA) also has tax benefits, but it’s not employer-sponsored like a 401(k). So, business owners, self-employed contractors, or anyone with taxable income can open one. You can even open an IRA alongside your employer-sponsored 401(k).
Several IRA versions exist, but there are two common types:
- Traditional
You only pay income tax when you withdraw money from the fund.
- Roth
You fund the account with post-tax income, so any withdrawals in retirement are tax-free.
Opening a Retirement Fund
Opening your retirement account can feel daunting at first, but there are a few basic steps to follow:
- Open the Account Early
You can choose a certified financial institution, like a bank or wealth management company, and set up an IRA or other non-employer-sponsored retirement fund relatively quickly. If your fund comes from your employer, you can opt into contributions upon being hired or speak with your HR department to learn how to enroll. If your employer offers 401(k) matching, understand how much you’d need to contribute to take full advantage.
- Select Your Investments
Some retirement funds let you choose which assets you invest in, whether that’s stocks early on or bonds just before your first withdrawal. Target-date funds are another common option that gradually shifts your investments to less risky areas as you near retirement. Your company’s retirement advisor or your own financial advisor can help guide you.
- Understand Your Targets
You can budget more accurately if you know how much you plan to spend in retirement and when you want to retire. If you begin saving early in your career, you may want to set a savings goal of 10%-15% of your annual income.1 If you track your targets by age, you may want to have roughly four times your salary saved by 45.2
No matter what, you can always adjust your contributions—especially as your income grows or changes.
Frequently Asked Questions
The $1,000-a-month rule is a well-known estimate of what you’ll need to fund a 30-year retirement. The idea is that you’d need a retirement account big enough to withdraw at least $1,000 every month for 30 years.3 But the cost of living is constantly rising, so taking the time to calculate what your personal situation will call for is a great first step before setting a target amount for your retirement fund.
You can retire with any amount saved, but $400,000 may not be enough to fund a comfortable 30-year retirement in the United States. To better prepare, you can speak with a certified financial advisor about your target retirement age and what you need to do to reach it with sufficient savings.
The Takeaway
Something is always better than nothing when it comes to retirement, so there’s no need to stress if you’re not where you want to be in your retirement saving journey right now. But the sooner you open and contribute to a retirement fund, the more time you’ll have to build up the reserves for the comfortable future that you deserve. Whether you choose an employer-sponsored 401(k), an IRA, or both, saving early on and regularly is key.
Megan Doyle is a business technology writer and researcher whose work focuses on financial services and cross-cultural diversity and inclusion.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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