Retirement Planning

How to Start a Retirement Plan From Zero

7 min read

Starting retirement savings from zero feels overwhelming. The numbers are big, the account names are confusing, and the consequences of getting it wrong feel catastrophic. The good news: the mechanics are simple, and starting now — at any age — is better than starting a year from now with a better plan.

Step 1: Capture the Employer Match

If your employer offers a 401(k) with a match, this is step one. Period. Nothing else matters until you've captured every dollar.

A typical match: 50% of your contributions up to 6% of salary. That means if you earn $60,000 and contribute 6% ($3,600), your employer adds $1,800. That's an immediate, guaranteed 50% return — before the money is even invested. No stock market, no real estate deal, no side hustle can match that risk-free return.

If you don't capture the match, you're effectively declining part of your compensation. The match is part of your pay package, just like salary and health insurance. Contribute whatever percentage triggers the full match — today, not next year.

Step 2: Open a Roth IRA

Once the 401(k) match is secured, the next priority for most people is a Roth IRA. The Roth is the most flexible retirement account: contributions are after-tax, growth is tax-free, and withdrawals in retirement are completely tax-free.

The 2025 contribution limit is $7,000 ($8,000 if you're 50 or older). You can open a Roth IRA at any major brokerage — Vanguard, Fidelity, Schwab — in 15 minutes online. Fund it via ACH transfer from your bank account.

If your income exceeds the Roth IRA limit ($161,000 for single filers, $240,000 for married filing jointly in 2025), use the Backdoor Roth strategy: contribute to a Traditional IRA (non-deductible), then immediately convert to Roth. Just make sure you don't have existing pre-tax IRA balances, or the pro-rata rule will trigger taxes.

Why Roth before maxing out the 401(k) beyond the match? Because the Roth gives you:

No required minimum distributions (RMDs) during your lifetime — you can leave the money growing indefinitely
The ability to withdraw contributions (not earnings) anytime without penalty — a last-resort emergency option
Tax diversification — having both pre-tax (401(k)) and post-tax (Roth) money gives you flexibility in retirement to manage your tax bracket year by year

Step 3: Go Back and Max the 401(k)

After the Roth IRA is funded, return to your 401(k) and increase contributions toward the annual limit ($23,500 in 2025, plus $7,500 catch-up if 50+). The 401(k) gives you a higher contribution ceiling than the IRA — $23,500 vs. $7,000.

Traditional 401(k) contributions reduce your taxable income now. Someone in the 22% bracket putting $10,000 into a Traditional 401(k) saves $2,200 on their tax bill that year. That's $2,200 that can go into the Roth IRA or a taxable brokerage account.

If your 401(k) offers a Roth option, you'll need to decide between Traditional and Roth for these additional contributions. The general rule: if you expect to be in a lower tax bracket in retirement (true for most people), Traditional wins. If you expect a higher bracket or value tax-free withdrawals, Roth wins. Having some of both is rarely a mistake.

Step 4: Consider an HSA

If you have a high-deductible health plan (HDHP), the Health Savings Account deserves a slot in your priority order — possibly even before the Roth IRA. The HSA is the only triple-tax-advantaged account:

Contributions are pre-tax (or tax-deductible if made outside payroll)
Growth is tax-free
Withdrawals for qualified medical expenses are tax-free

At age 65, you can withdraw for any reason and pay only ordinary income tax — identical to a Traditional IRA, but with the bonus of tax-free medical withdrawals. In 2025, contribution limits are $4,300 for individuals and $8,550 for families. Many employers also contribute to employee HSAs as an incentive.

If you can afford to pay current medical expenses out of pocket and leave the HSA invested, it becomes one of the most powerful retirement accounts available. Save your medical receipts — you can reimburse yourself from the HSA at any time, even decades later, completely tax-free.

Step 5: How Much to Actually Save

The standard recommendation is 15% of gross income toward retirement. Someone earning $70,000 should aim for roughly $10,500 per year — or about $875/month.

Simple test: maxing a Roth IRA ($7,000/year) plus a 6% 401(k) contribution on $70,000 ($4,200/year with a 50% match adding $2,100) gets you to $13,300/year — actually above the 15% target.

If you're starting late (40s or 50s), aim higher — 20–25%. Catch-up contributions help: the 50+ bonus on 401(k)s ($7,500) and IRAs ($1,000) adds $8,500 of additional tax-advantaged capacity per year.

Step 6: What to Invest In

The biggest mistake beginners make after opening an account: leaving the contributions in cash. Contributions sitting in a money market settlement fund inside a Roth IRA earn near nothing. They must be actively invested.

The simplest approach: a target-date index fund. Pick the fund closest to the year you turn 65. Vanguard Target Retirement 2060 (or 2065, etc.) holds a globally diversified portfolio of stocks and bonds and automatically shifts toward bonds as you age. One fund, no decisions, done.

If you want to build your own three-fund portfolio:

Total US stock market fund: VTI, ITOT, FSKAX, SWTSX, or equivalent. This is your growth engine. Roughly 55–65% of the portfolio.
Total international stock fund: VXUS, IXUS, FTIHX, or equivalent. Diversifies beyond the US. Roughly 25–35% of the stock allocation.
Total US bond market fund: BND, AGG, FXNAX, or equivalent. Dampens volatility and provides rebalancing ammo. Start at roughly 10% in your 30s and increase over time.

For someone in their 30s starting from zero, a 90% stock / 10% bond allocation is reasonable. Someone in their 50s starting from zero might lean 70/30, accepting lower growth in exchange for less volatility — a large drawdown close to retirement would be harder to recover from.

Step 7: Automate and Step Back

The most important step: set up automatic contributions and then stop looking. Automate the 401(k) through payroll. Automate the Roth IRA through recurring ACH transfers from your bank. Choose your investments once (a target-date fund or a simple two- or three-fund portfolio), and check once per year — not once per week.

Checking your portfolio daily is the financial equivalent of weighing yourself after every meal. It produces anxiety, encourages bad decisions, and doesn't change the long-term outcome. The investors who do best over 30 years are the ones who set up automation and largely ignored the market's daily noise.