I’m 22 and Lost When It Comes to My 401(k). How Do I Start Planning for Retirement?

If you’re a young worker, retirement planning can feel overwhelming, especially when you’ve barely begun your career.

One Reddit user captured this uncertainty perfectly:

“I am 22 and have zero idea of what a 401(k) even is to be quite honest, besides that it’s for retirement, but I contribute 5% of each paycheck with a 5% employer match. I make $58,000 a year. Do I need to be putting more? Less? Help please lol.”

Questions like these are common, and the good news is that confusion is normal—and completely fixable. Understanding how a 401(k) works, why saving when you’re young matters, and how different account types affect taxes can set the stage for powerful long-term wealth building. Below, we break it all down in simple terms.

How To Get Started with a 401(k)

A 401(k) is a tax-advantaged, defined-contribution retirement savings plan.

Once enrolled, you make contributions to your 401(k) automatically from your paycheck. Employers may also offer a matching contribution, which is a percentage of your salary that your employer deposits in your account.

If you don’t know how much to contribute to your 401(k), experts say you should at least contribute enough to snag your employer match, since it’s essentially free money. For example, if you contribute 5% of your paycheck to your 401(k) and your employer matches you at 4%, you’d see a 9% overall contribution to your 401(k).

Getting started with a 401(k) typically involves choosing your contribution rate and selecting investments. Most plans offer target-date funds, stock funds, and bonds.

For tax year 2025, the most you can contribute to your 401(k) if you’re under 50 is $23,500. For tax year 2026, it’s $24,500.

The Difference Between Starting a 401(k) at Age 22 vs. When You’re Older

Starting at age 22 gives you a powerful advantage: time. Compound interest—the process of earning interest on your interest—accelerates dramatically the longer you stay invested. Money saved in your early 20s will typically have over four decades to grow before you retire.

This means that someone who saved consistently starting at age 22 would need to put away far less money each year compared to someone who started saving later.

Consider the following example:

Amarpreet and Leah are friends, but they started investing at different times. They both want to retire at age 65. And they both earn an average 7% annual return.

• Amarpreet, who’s 22, starts investing now. She contributes $200 per month for 43 years (from age 22 to 65). At a 7% annual return, those contributions grow to about $655,226 by age 65. (Total money contributed: $103,200.)
• Leah, who’s also 22, waits 10 years before she starts investing. To have the same amount that Amarpreet will at age 65, Leah will have to save $425 per month. (Total money contributed: about $168,300.)

So, by waiting until she’s 32, Leah must save more than twice as much each month ($425 vs. $200), and put in over $65,000 more out of pocket over her lifetime to reach the same retirement balance.

Starting at age 22 means each dollar has more years to compound. So when you start investing, in many cases, can matter far more than how much money you start with.

Traditional 401(k) vs. Roth 401(k)

Employers typically offer two types of 401(k)s: traditional and Roth. The difference mostly comes down to taxes.

• Traditional 401(k): Contributions are made pre-tax, reducing your taxable income today. This means you pay less in taxes today. The catch is that you’ll need to pay income taxes on your funds when you withdraw them (typically in retirement, when your income might be lower).
• Roth 401(k): Contributions are made with after-tax dollars, so there’s no tax break upfront. As long as you’ve had the account for five years, withdrawals are tax-free.

To choose between a traditional 401(k) and a Roth 401(k), think about when you want to pay taxes: now (get a Roth account) or later (get a traditional account). To make that decision, you need to predict when your income will be higher: now or in retirement.

If you’re a younger employee, your income likely hasn’t peaked yet, so you might consider making Roth contributions for now. That is, your income now is likely less than what it will be in retirement, when you’re making withdrawals.

In a few decades, though, you might want to switch to traditional contributions, since by that point, your income might be higher than what it will be in retirement.