How to save for retirement in your 20s and 30s

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How can young adults in their 20s and 30s manage student loan repayment while saving for retirement? What are the best investment approaches for young adults? How much should young adults be saving for retirement? What do young adults need to know about preparing for retirement?

Those are just some of the questions Stephanie Guild, head of investment strategy at Robinhood, answered in a recent episode of Decoding Retirement.

Whenever you have debt, it's important to focus on paying it off, starting with the most expensive debt first, Guild said.

However, Guild doesn't think young adults need to rush to pay off all their student loans immediately, depending on their interest rate. A balanced approach — paying down debt while also investing — can be beneficial, especially if loan interest rates are lower than potential long-term market returns.

Read more: How much money should I have saved by 30?

Historically, the S&P 500 (^GSPC) has averaged about 10% annually, though future returns may vary. Currently, the interest rate on direct subsidized and direct unsubsidized federal student loans is 6.53%.

When it comes to paying down student debt and investing, "I think doing a little bit of both is a good idea," said Guild, who emphasized the importance of understanding loan terms and exploring ways to lower interest rates.

Additionally, employer benefits can provide some relief. The SECURE Act 2.0 allows employers to offer matching contributions for employees who are repaying student loans. This means an employer can contribute to an employee's retirement plan based on their student loan payments.

However, not all companies offer this benefit, so employees should check with their HR or benefits department.

"It's probably not widely done," said Guild. "It takes a lot for companies to change their benefits and policies. But absolutely, it's something you should ask about. Why not ask for the help?"

The traditional investment guideline suggests allocating a percentage of your portfolio to stocks using the guideline 100 minus your age, with the remainder in bonds. For example, someone in their 20s might have a portfolio of 80% stocks and 20% bonds.

However, Guild said your investment strategy should consider more than just age. While this guideline takes time horizon into account, and that's "very important," a longer time horizon allows investors to ride out market fluctuations. "It means that you have a better chance of capturing the positive things that come out of investing," she said.