If Annamaria Lusardi had one wish, it would be for people to understand the importance of compound interest.
Lusardi, who heads Stanford's Initiative for Financial Decision-Making, and other financial experts agree that the best time to start investing for retirement was yesterday.
"I cannot overplay the importance of time. It's so essential when we plan for retirement," Lusardi said. "Time is on our side."
The sooner you start, the more you will earn interest on interest. For example, if you put $1,000 into a retirement account that earns 5% interest each year, you'll have $1,050 at the end of the first year and $1,102.50 the next without ever putting more money into the account. If you start early, your money has time to grow significantly.
However, in reality most people don't get serious about planning for retirement until their late 20s or 30s, according to Deryck Gryne, a senior financial adviser at Ally Invest Advisors.
"If you're past that point, that's okay," Gryne told USA TODAY. "The most important step is to start. Whether you're 25 or 45, today is always better than tomorrow when it comes to retirement planning."
Here's what to know about saving for retirement:
Financial experts agree that one of the best ways to start saving for retirement is to take advantage of your employer's 401(k) match if one is available to you.
Employees who don't take full advantage of it are missing out on an average of $1,336 each year, which could add up to $42,855 over 20 years assuming an average annual return of 4.5%, according to Vanguard and a 2015 Financial Engines research report.
Employer matches vary, but the average tends to hover around 4%. Find out how much you need to contribute to get the full match and increase your savings rate to capture all the free money you can.
"If you have one that offers a 401(k) with a match, there are no doubts about what you should do," Lusardi said. "No financial market is able to offer that benefit."
To comfortably retire, financial experts advise getting to a point where you are contributing 10% to 15% or more of your income to your 401(k) depending on when you start, when you retire, and where you live. But they say it's not bad to start small.
Dr. Peter Fisher, founder and CEO of Human Investing, said contributing enough to capture an employer match is the best way to check a box when starting to save for retirement without making things more complicated than they need to be.
"Go through the math yourself. If I contribute five, my company contributes four, I get a tax deduction before I've even started investing, I'm up 100% on my money," Fisher said. "If I told anybody that and didn't call it retirement, they would jump at it."
Some employers' 401(k) match is tied to a vesting schedule, meaning you will need to stay with the company for a certain amount of time before you can claim their contributions. Lusardi said even if you're unsure about how long you'll stick with an employer, it never hurts to start saving. What you contribute to a retirement account is always yours to keep.
You've heard the experts' advice. You go to start contributing to your company's plan, but there are two options: a traditional and a Roth 401(k). What's the difference?
They're both powerful tools to help build retirement savings, but they work a little differently, Gryne said. He explained that with a traditional 401(k), you are contributing pre-tax dollars, meaning that money is taken out of your paycheck before taxes are taken out. This lowers your taxable income for the year and could reduce what you owe when tax season rolls around.
So, what's the catch? With a traditional 401(k), Gryne explains, your investments will grow tax-deferred, and you'll have to pay taxes on the money when you start making withdrawals in retirement.
If that doesn't sound appealing, you might consider a Roth 401(k) which works the other way. Contribute after-tax dollars and don't receive a tax benefit now, but the money will grow tax-free, and you won't need to pay taxes when you make withdrawals in retirement.
The choice is a personal one. A traditional account may make sense if you don't expect to be in a larger tax bracket when you retire. Inversely, a Roth account may be the better choice if you predict your taxes will be higher when you retire.
Several things can affect your tax rate, including where you live and a change in your filing status. Those who plan for their income to drop and move to a state with lower taxes, like Florida, when they retire might prefer a traditional 401(k), Lusardi said.
Without access to a 401(k) account, one of the best tools available to you is an individual retirement account. An IRA is another way to grow retirement savings on a tax-free or tax-deferred basis, depending on the account you choose.
You can open one through a bank, credit union, online broker, or investment company. Common places people turn when opening an IRA include Fidelity, Charles Schwab, and Vanguard.
The most popular accounts are traditional IRAs and Roth IRAs. Like 401(k)s, you'll pay taxes when you withdraw money with a traditional IRA and pay taxes now when you contribute to a Roth IRA.
With most IRAs and 401(k) accounts, you can generally start making withdrawals without penalties six months after you turn 59, but there are exceptions to this rule.
There are several other types of IRAs, including a SEP IRA which is common for self-employed people and a SIMPLE IRA which is sometimes offered by small businesses.
Contribution limits are something to keep in mind with IRAs. In 2025, savers using this method can contribute up to $7,000 - or $8,000 if they are 50 and older - per year. That's often not enough to completely fund a retirement.
Still, they can be a good way to get started. Lusardi particularly recommends Roth IRAs to young people who are still in low tax brackets.
"The sooner we start, the more our money will grow," Lusardi said. "I tell my students to open a Roth IRA during their college years and invest the money they get during their summers."
Opening an IRA can also be an option for someone who has already maxed out their 401(k) contributions or wants to diversify their retirement investments.
When it comes to preparing for retirement, the most important thing is to have a plan.
The reality is that many don't. Some 20% of adults 50 and over have no retirement savings, a new AARP survey found.
If you don't have a 401(k) or an IRA, Fisher hopes you have a different strategy in mind. He said for most people, it's not an inheritance, and that he heard some creative ideas while interviewing people for his research.
For example, Fisher admired the resilience of one person he met who had lost a significant amount in the stock market, pulled out his remaining money, and shifted focus to investing in real estate. Another person he met wasn't contributing to his 401(k) but gave a detailed explanation about his investments in cryptocurrency. Fisher liked that he was at least thinking about retirement.
"My concern tends to rise when someone lacks a plan and has no history of saving. I'm less worried when someone is saving - even if it's not in the optimal way - because they're at least building the right habit," Fisher said. "Over time, many people learn from their financial missteps and self-correct. The key is starting the discipline early."
Gryne said while alternative investments like real estate and cryptocurrency can diversify a portfolio, be wary that they also introduce higher risk and volatility. He advises each person to make a plan that is best in line with their risk tolerance and goals.
Reach Rachel Barber at rbarber@usatoday.com and