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Published: Jan 03, 2022 5 min read
A squirrel is looking into its saving vault.
Jose Velez / Money

This article is part of Money's January 2022 digital cover, which features 22 ways to make 2022 the best money year of your life. Browse all 22 articles here.

You know your retirement isn’t going to pay for itself. Today, Social Security replaces only about 40% of the average earner’s former salary, and with

But it can be hard to set money aside for the future. Retirement may seem far away, while student loans and other bills demand attention right now. And you might think you need a lot of money to start investing, whether in a 401(k) or another type of account.

For 2022, the IRS raised the 401(k) contribution limit to $20,500 for workers under 50 (workers 50-plus can contribute an additional $6,500 in “catch-up” contributions). But you don’t have to be a super saver to reap the benefits.

It’s fine to start small. “The key is to establish a habit,” says Dave Totah, certified financial planner at Exencial Wealth Advisors in Frisco, Texas.

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Here are three easy ways to get started.

Pay Yourself First

Set yourself up for success by automating your contributions to your retirement account. That way, every time you get paid, an amount that you designate goes directly into your retirement savings and not into your bank account to be spent.

If you don’t take this approach and instead simply try to save whatever money is left over at the end of the month, it’s not going to work, Totah says. “Plan to save,” he says. Recent research finds that more than half of Americans live paycheck to paycheck, so there might not be anything left over if you leave your savings to chance.

Aim for the Company Match

Many employers that offer 401(k) plans match workers’ contributions up to a certain point. For example, among companies that use Vanguard’s platform, 86% offer a match, and the most common matching formula is $0.50 on the dollar on the first 6% of pay.

Financial advisors recommend contributing at least enough to your 401(k) to get the company match, since that’s free money. But if you can’t afford to contribute that much, don’t let it stop you from getting started. “Even if you can only contribute 1% or 2%, do it,” says Kristen Carlisle, general manager, Betterment for Business. You can increase your contribution rate every time you get a raise, or set your rate to increase automatically at a certain point every year.

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Look Beyond the 401(k)

Unlike a 401(k), you can open up an individual retirement account (IRA) or a health savings account (HSA) on your own, without your employer. They’re a key savings vehicle for freelancers, gig workers and those in-between jobs. What’s more, Roth IRAs are generally well suited to young people just starting out. Unlike a traditional IRA, which you fund with pre-tax dollars, Roth IRAs are funded with post-tax dollars. You pay your taxes upfront, when you’re young and in a lower income tax bracket than you likely will be as you advance in your career. Money in your Roth IRA grows tax free and can be withdrawn tax free in retirement. For 2022, workers under 50 can contribute $6,000 to an IRA, while those 50-plus can contribute $7,000.

An HSA allows you to save toward medical expenses, now or in retirement. They’re triple-tax free: you get a tax deduction on your contributions, the money grows tax free, and you can withdraw money tax free as long as it goes towards qualifying medical expenses. And as long as you use them for qualifying health, dental and vision expenses, there’s no expiration date. In order to contribute to an HSA, you need to be enrolled in a high-deductible health insurance plan. You can contribute up to $3,650 to your HSA for 2022.

You can contribute to an IRA or HSA alone or alongside a 401(k), if you have access to one through work.

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