At 25, it doesn’t feel urgent. You’re juggling rent, student loans, maybe a car payment, and trying to keep enough in checking to avoid an overdraft. Retirement feels like another lifetime. So when someone brings up the idea of starting a Roth IRA, it’s easy to dismiss it. You’re not making much money yet.

You’ll start investing later when your job pays more, when you have “extra” cash, when you finally feel like an adult. But here’s the harsh truth: waiting even a few years can cost you hundreds of thousands in lost growth. And that seemingly small decision to skip starting a Roth IRA at 25? It could quietly turn into a $500,000 mistake. This isn’t scare tactics. It’s simple math and a powerful lesson in what time does for your money.

The Benefits of Opening a Roth IRA Sooner Rather Than Later

The Power of Starting Early (Even With a Little)

When it comes to building wealth, time beats the amount every time. Compound interest, the magical snowball effect of earning interest on your interest, works best when it has decades to do its job. That’s why starting at 25, even if you’re only contributing modestly, can lead to astonishing growth over time.

Let’s break it down with a simple example. Say you invest $6,000 a year into a Roth IRA starting at age 25, and you do it consistently until you’re 35, then stop contributing entirely. Assuming a modest 7% average return, by age 65, you’ll have over $500,000. You invested just $60,000 total, and the rest is all growth.

Now, let’s say you wait until you’re 35 to start and invest the same $6,000 annually, except this time, you keep going for 30 full years until you’re 65. You’ve invested three times as much ($180,000), and guess what? You still end up with less than the person who started earlier and stopped after a decade. That’s the cost of waiting.

Why a Roth IRA Is Your Secret Weapon in Your 20s

So why specifically a Roth IRA? Because it’s tailor-made for young investors. Unlike traditional retirement accounts, a Roth IRA is funded with after-tax dollars. That means you pay taxes now when your income is relatively low, and then your investments grow completely tax-free for decades. When you withdraw the money in retirement, you don’t owe a cent in taxes on either the principal or the earnings.

This matters more than you think. As your income grows, you’ll likely enter higher tax brackets. Paying taxes now, at a lower rate, is a strategic win. It’s essentially locking in your tax rate today—and shielding future earnings from the government’s cut.

Add in the flexibility of a Roth IRA (you can withdraw your contributions anytime, penalty-free), and it becomes the perfect beginner-friendly investment vehicle. It’s one of the few places in finance where the “starter version” is also the smartest long-term move.

The Psychological Trap: “I’ll Do It Later”

The biggest threat to your financial future isn’t lack of money. It’s procrastination disguised as practicality. When you’re 25, the idea of retirement at 65 is so abstract it might as well be fiction. You’re focused on surviving now, and the idea of setting aside money you won’t touch for 40 years feels almost irresponsible.

But here’s the thing: the longer you wait, the more you have to contribute to catch up. A 25-year-old can hit a $1 million retirement goal by investing around $300/month. A 35-year-old needs to double that. Wait until 45, and you’re looking at over $1,000/month, and you’ve already lost two decades of tax-free compounding.

Time is the one thing you can’t buy back. And a Roth IRA is the clearest example of how early effort pays off exponentially.

What Happens When You Don’t Start

If you’re in your 30s or 40s now and didn’t start a Roth IRA in your 20s, you might already feel the sting. Playing catch-up means contributing more aggressively, taking on more risk, or working longer. None of these are ideal options, especially when they could’ve been avoided with small sacrifices years ago—skipping a few takeout meals a month, delaying a new phone, or redirecting tax refunds into your future.

But here’s the good news: it’s not too late to start now. The longer you delay, the more dramatic the catch-up, yes—but even starting in your 30s or 40s is vastly better than never starting at all. Just don’t mistake the ability to start later with the belief that it’s equally effective. It’s not.

Roth IRA vs. Lifestyle Creep

Another reason people skip Roth IRAs in their 20s? Lifestyle inflation. You get your first decent job, and suddenly, you’re “treating yourself” with nicer clothes, better tech, or moving into a more expensive apartment. It’s easy to justify—after all, you’ve worked hard. But if you’re not carving out a portion of that income for future-you, then present-you is eating your retirement alive.

A Roth IRA is a smart defense against lifestyle creep. Automate a monthly contribution before you even see the money. The goal isn’t to deprive yourself. It’s to get used to living on slightly less while your wealth builds quietly in the background.

Turning Regret Into Action

If you’re reading this at 25, you’re lucky: you still have time to avoid this mistake. If you’re reading this at 35 or 45, you’re lucky, too, but in a different way. You now fully understand the stakes. The worst mistake isn’t skipping the Roth IRA in your 20s. It’s knowing how powerful it is now—and still not doing anything about it.

The $500,000 mistake only becomes permanent if you let it. The key is to start today. Open the account. Fund it, even with $50. Automate it. Revisit it annually. And when life gets messy or money feels tight, remember: this isn’t a luxury. It’s the most cost-effective wealth-building move you’ll ever make.

It’s Never About “Having Enough.” It’s About Starting Anyway

No one ever thinks they have “enough” money to start investing. But the point of starting early isn’t how much. It’s when. A Roth IRA doesn’t reward big bucks. It rewards early bucks. And every year you wait is a year lost to time you can never get back.

If you could go back and give your 25-year-old self one financial tip, would it include a Roth IRA, or are you still waiting to take your own advice?

Read More:

Why Your Roth IRA Might Not Be As Tax-Free As You Think

6 Early-Withdrawal Myths About Traditional IRAs That Keep Savers Broke

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