Six Lessons For Young Workers

Six Lessons For Young Workers

When your child or grandchild lands their first real job, there’s a lot to celebrate: a paycheck, independence, and the beginning of adulthood. There’s one more thing that may quietly shape their financial future more than almost anything else they do in their 20s: Their 401(k) retirement account.

For many young workers, enrolling in an employer retirement plan is an afterthought. Retirement feels decades away, and there are many more immediate priorities competing for attention.

However, here are six important 401(k) lessons worth sharing with your child or grandchild.

1. Start immediately. One of the biggest mistakes some young workers make is waiting until they earn more money before contributing to their retirement plan. Yet, time is often more valuable than the amount invested. Even a small contribution made in their 20s has decades to grow through the power of compounding. Developing the habit of saving early can be far more important than trying to invest large amounts later in life.

2. Get the company match. If an employer offers a matching contribution, workers should contribute enough to receive the entire match. Think of it as free money. For example, if the company matches 4% of salary, contributing at least 4% immediately doubles that portion of the investment.

3. Keep the investments simple. For example, a target-date retirement fund or a broad market index fund provides diversification and professional management. The goal isn’t to pick the next winning stock—it’s to build wealth steadily over time.

4. Ignore market volatility. Market downturns are a part of investing. In fact, workers contributing through payroll deduction are often investing at lower prices during market declines.

5. Increase contributions with raises. As income grows, retirement contributions should grow as well. A simple strategy is to increase 401(k) contributions by 1% or 2% every time a raise is received. Because the increase comes from new income, most people barely notice the difference in their take-home pay. Over the next few decades, the goal should be to work toward maximizing contributions. For example, in 2026, employees can contribute up to $24,500 annually to a 401(k), creating a powerful opportunity for long-term wealth accumulation.

6. Choose Roth contributions early. Many young workers begin their careers in relatively low tax brackets. When available, Roth 401(k) contributions can be particularly attractive because taxes are paid today while withdrawals in retirement are tax-free. Paying taxes at a lower rate early in a career can create significant tax benefits decades down the road.

Young Workers’ Advantage: Time

When it comes to retirement planning, young workers have something that older investors can never recover: time. Parents often help their children prepare for a first job interview, negotiate a salary, or choose employee benefits. Helping them understand the value of a 401(k) account may be just as important. Learn more by speaking with a Jemma Financial Advisor.