Start Your Retirement Fund Young: The Power of Compounding and How to Save on an Irregular Income

Tim Moneysaurus · 2026-07-22

Most of us put off thinking about retirement because it feels far away, and even further away when your income changes every month. But the truth is that time is the most expensive asset you have right now, and it only shrinks with every year you wait. The good news: starting young does not require a big number. It requires a small, consistent habit that you let grow.

The reality: most of us are not ready

Indonesia's work structure makes retirement tricky. As of February 2025, about 86.58 million people, or 59.40% of all employed people, work in the informal sector (BPS via Antara, Feb 2025). That means most workers, from freelancers and traders to drivers and creators, have no automatic payroll deduction and no employer retirement plan.

The data shows the result. As of 2024, only about 22.90 million workers had old-age security, equal to just 16.11% of the national workforce (OJK Institute). Pension literacy sits at only 27.79% according to the 2025 SNLIK survey (OJK Institute). So if you have not thought about retirement yet, you are far from alone. That is exactly why starting now puts you ahead of most people.

Why starting young wins big: a compounding example

This is what makes starting young so powerful. Compounding means your investment returns start earning returns of their own the next year. The effect is small at first, then it explodes near the end.

The example below is illustrative arithmetic assuming a 7% annual return. It is not a promise of returns.

• Ani starts at age 25, saving Rp500,000 a month (Rp6 million a year) for just 10 years, then stops and lets it grow until age 60. She sets aside only Rp60 million total. Her balance at 60 is around Rp450 million.
• Budi starts at age 35, saving Rp500,000 a month all the way to age 60, so 25 years. He sets aside Rp150 million total. His balance at 60 is around Rp379 million.

Ani sets aside Rp90 million less and stops 25 years earlier, yet still finishes ahead. Not because she saved more, but because her money had more time to compound. That is the whole point: what matters is not the size of the first deposit, but how early you start and how consistently you keep going.

How to save when your income is not fixed

"Save every month" is easy advice when your paycheck is steady. When your income swings, use this approach instead:

1. Budget from the floor, not the peak. Look at your last 6 to 12 months and take your lowest month as your baseline. Base your living costs and savings commitment on that safe number, not on your busiest month.
2. Average it out and keep a thicker buffer. Because income is volatile, hold a bigger emergency fund, aim for 6 months of expenses or more rather than 3. Use surplus months to pre-fund the lean ones.
3. Pay yourself more when the money is flowing. In busy months, move a larger chunk into retirement before it gets spent. In quiet months, contribute the minimum or skip, as long as the yearly total stays on track.
4. Automate the small amount. A small auto-transfer you can always afford beats a big one you keep failing to make. Consistency beats intention every time.

The order of operations still holds. Before investing aggressively, clear a starter emergency fund and pay down high-interest debt (like paylater or online loans) first. On the debt side, compounding works against you far faster than it works for you on the investing side.

Informal workers still have access. BPJS Ketenagakerjaan has a Bukan Penerima Upah (non-wage earner) category that includes the old-age benefit for freelancers and the self-employed (BPJS Ketenagakerjaan). Beyond that, there are DPLK plans, mutual funds, and retail government bonds as long-term vehicles.

Break retirement into small milestones

When younger people choose to spend on experiences instead of saving for retirement, it is often not because they are reckless. It is because "retirement" feels impossible and far off. The fix is not a lecture, it is to break it down. Swap the target of "Rp X billion at 60" for something visible, like "Rp2 million in my retirement account this year," then raise it slowly. Every small milestone you hit makes the long-term goal feel real and reachable.

The key to all of this is knowing where your money goes. Tracking an expense can be as simple as texting "lunch 25k" to Moneysaurus on WhatsApp, so you actually know your income floor and monthly surplus without the hassle.

The takeaway

You do not need a big income or perfect timing to start a retirement fund. You need to start, today, with a small number you can keep, and let time and compounding do the heavy lifting. One takeaway: the cheapest deposit you will ever make is the one you make earliest.

Data sources: informal-worker share of 59.40% from BPS via Antara (Feb 2025); old-age security coverage of 16.11% and pension literacy of 27.79% (SNLIK 2025) from OJK Institute; the non-wage-earner program from BPJS Ketenagakerjaan. The compounding example is illustrative arithmetic assuming a 7% annual return, not a promise of returns.