How to rack up more money than your grandfather in a retirement fund

If Chris Arnold could hammer home just one message about money to all of his listeners, it would be about saving for retirement in their 20s, as soon as they start earning.

The National Public Radio journalist says it’s the most important lesson he has come across while working on a new series called “Your Money And Your Life.”

It may be surprising to 20-something Americans who are entering a job market with stagnant wages and living in cities with ever-rising rents. The money they have left over from their paychecks after living expenses is probably less than it ever will be. But those dollars invested for retirement in your 20s can go a lot farther than those invested later in life.

Arnold says far too many people turn 45 or 50, and get hit with the realization that retirement isn’t all that far away.

“[They say], ‘I gotta start saving,’ but they don’t have the time horizon to get the returns they need,” he said. “It’s a major failure of our education system.”

It may also be a failure of our political system. Three years ago, Britain’s parliament passed a law that requires all employers to automatically enroll virtually all workers into retirement savings plans. Workers can opt out, but few do. The plan is still being rolled out but, so far, government officials say 91% of workers who have been enrolled are sticking with it. That’s because it’s made very clear to them that opting out would mean giving up free money from their employer.

And, perhaps surprising, lower income workers are sticking with it at an even higher rate.

Arnold says the U.K. law is showing that, “even if you’re young and think you can’t save, maybe you have more capacity to save than you think.”

Americans aren’t getting the very powerful nudge of nationwide auto-enrollment. Instead, the U.S. introduced a rule in 2006 that provided incentives for companies to automatically enroll employees in 401(k) plans, without making it mandatory. More employers are voluntary doing this now, but the vast majority are not. Many don’t offer any kind of savings plan for their workers.

Another key take-away from Arnold’s reporting is avoiding excessive retirement fees. The chart below shows just how much something that might sound small—say, 2% in annual fees–can seriously hurt returns over time.

The math gets a lot more complicated when you consider additional factors, such as market fluctuations, inflation and additional contributions over time. But the point remains: fees take a significant chunk out of your potential long-term return.

In an episode from this week, Arnold hooked up the president of a manufacturing firm with some business professors, who ended up telling him his employees are being charged fees that are way too high in the company’s 401(k) plan.

“I think I’ve seen worse but not by much,” Kent Smetters of The Wharton School tells Eric Lipke, the head of Midwest Industrial Tool Grinding Inc. “This really is a high-fee plan.”

Another story in the series takes a look at how much someone can save by investing with a robo-adviser, like Wealthfront or Betterment. These tend to charge much lower fees than traditional advisers. Arnold also reached out to some of the most respected investors in the world and asked them what a good retirement portfolio should look like.

Arnold’s new series is a helpful guide for young people to become more aware of what they should or should not be doing to have a successful financial life. People can see when new episodes launch, and submit questions or story ideas, by joining the “Your Money and Your Life” Facebook group.

This story has been updated and no longer includes a previous chart whose numbers were outdated.

Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.