Should a 20-Year-Old Invest in a 401k? Here's Why You Should

Why Investing in a 401k at 20 is a Game Changer

Honestly, when I was 20, I didn’t think much about retirement. It seemed like something for much later in life. But if you're reading this, you're probably at that age where the question "Should I invest in a 401k?" has crossed your mind, and I get it—it's a little daunting. But let me tell you, starting a 401k at 20 could be one of the smartest financial moves you’ll ever make.

So, why exactly should you consider it? Well, the earlier you start investing, the more time your money has to grow. You’ll hear the term "compounding interest" thrown around a lot, and there’s a reason for that: it’s one of the most powerful tools in the world of investing.

The Power of Starting Early: Compounding Interest

Let’s break it down. When you invest in a 401k, especially at 20, your money starts to earn interest. Over time, you don’t just earn interest on your initial deposit—you earn interest on the interest. This compounding effect can seem small at first, but trust me, it adds up big time.

Real Example: How Compounding Works

Here’s a quick example: let’s say you start putting away $200 a month at age 20. If your investments average a return of 7% (which is pretty typical for the stock market over the long term), by the time you’re 60, you’ll have around $400,000. And if you waited until you were 30 to start—just 10 years later—you’d only have about $250,000. That’s a huge difference, all thanks to those extra years of compounding.

I had a conversation with my friend Mike the other day—he started saving for retirement at 22, and he’s always regretted not starting sooner. When he saw how much he could have earned by starting at 20, he said it was a wake-up call.

The 401k Match: Free Money You Can't Ignore

Now, let’s talk about something that many 20-year-olds might overlook: the employer match. A 401k isn’t just about putting your own money in. Many employers will match a portion of what you contribute. For example, if you contribute 5% of your salary, your employer might match that with an additional 5%.

Why It’s Like Free Money

That’s essentially free money! And let’s be real—who wouldn’t want some free cash? Even if you’re not contributing a ton, that match is something you don’t want to leave on the table. Trust me, I learned the hard way when I didn’t take full advantage of my employer’s match early on. It wasn’t until I saw how much I had missed out on that I started taking it seriously.

Will You Be Able to Access It?

I know what you’re thinking: "I’m 20, I don’t want to lock my money away for decades." And fair enough—accessing your 401k before retirement can be tricky. Generally, you can’t withdraw funds without penalty until you're 59½. But here's the thing: retirement is far in the future, and putting your money in a 401k forces you to stay disciplined about saving.

Emergency Fund vs. 401k: What’s the Priority?

Now, of course, you shouldn’t be putting every cent you have into your 401k if you don’t have an emergency fund or other financial obligations. That’s something I had to realize myself. When I was younger, I went all-in with savings, but I didn’t have enough liquid funds for emergencies. It was stressful, and I had to scramble to come up with money for things like car repairs. So, yeah, having a balance is key.

Tax Benefits of Contributing to a 401k

One thing that really excites me about 401k contributions is the tax benefits. For traditional 401ks, your contributions are made before taxes, which means you lower your taxable income for the year. This can be a huge advantage, especially if you’re in a higher tax bracket.

Roth vs. Traditional 401k: Which One to Choose?

There are two main types of 401ks: Roth and traditional. The traditional 401k allows you to contribute pre-tax dollars, which reduces your taxable income today. However, you’ll pay taxes on the money when you withdraw it during retirement. On the other hand, the Roth 401k allows you to pay taxes on the money now, but the withdrawals in retirement are tax-free. If you’re 20, the Roth could be a smart move because you’re likely in a lower tax bracket now, and paying taxes on the contributions up front means you’ll get tax-free money when you retire.

Will You Really Stick With It?

Here’s a tough truth: staying committed to your 401k can be hard. Life gets in the way—trust me, I’ve been there. You’ll face moments where you want to pull back on contributions, whether it’s because of a new phone you want to buy or a vacation. But let me tell you: don’t let those impulses derail your retirement plan.

Make It Automatic

The best piece of advice I got was to set up automatic contributions. If you don’t see the money in your bank account, you won’t be tempted to spend it. I remember feeling so much better once I automated my contributions—it was like I couldn’t even touch the money. And honestly, after a while, you don’t even miss it.

Conclusion: Is a 401k Worth It for a 20-Year-Old?

Honestly, yes! If you’re 20, starting a 401k is one of the smartest moves you can make for your financial future. The earlier you start, the more time your money has to grow, and that compounding interest can make a huge difference. Plus, if you have an employer match, that’s free money you can’t afford to ignore.

Just remember: it's about balance. Build your emergency fund first, then start putting some of your money into your 401k. Don't let the fear of locking up your money stop you—because in the end, that 401k is going to be your ticket to a comfortable retirement. Start today, and thank yourself later!

Is 165 cm normal for a 15 year old?

The predicted height for a female, based on your parents heights, is 155 to 165cm. Most 15 year old girls are nearly done growing. I was too. It's a very normal height for a girl.

Is 160 cm too tall for a 12 year old?

How Tall Should a 12 Year Old Be? We can only speak to national average heights here in North America, whereby, a 12 year old girl would be between 137 cm to 162 cm tall (4-1/2 to 5-1/3 feet). A 12 year old boy should be between 137 cm to 160 cm tall (4-1/2 to 5-1/4 feet).

How tall is a average 15 year old?

Average Height to Weight for Teenage Boys - 13 to 20 Years

How to get taller at 18?

Staying physically active is even more essential from childhood to grow and improve overall health. But taking it up even in adulthood can help you add a few inches to your height. Strength-building exercises, yoga, jumping rope, and biking all can help to increase your flexibility and grow a few inches taller.

Is 5.7 a good height for a 15 year old boy?

Generally speaking, the average height for 15 year olds girls is 62.9 inches (or 159.7 cm). On the other hand, teen boys at the age of 15 have a much higher average height, which is 67.0 inches (or 170.1 cm).

Can you grow between 16 and 18?

Most girls stop growing taller by age 14 or 15. However, after their early teenage growth spurt, boys continue gaining height at a gradual pace until around 18. Note that some kids will stop growing earlier and others may keep growing a year or two more.

Can you grow 1 cm after 17?

Even with a healthy diet, most people's height won't increase after age 18 to 20. The graph below shows the rate of growth from birth to age 20. As you can see, the growth lines fall to zero between ages 18 and 20 ( 7 , 8 ). The reason why your height stops increasing is your bones, specifically your growth plates.