The right mindset
Retirement planning doesn't have to be overwhelming. The key is starting with a simple, sustainable approach and building good habits early. You don't need to figure everything out at once.
Think of retirement planning as building a foundation. Start with the basics, then add layers as your income and knowledge grow. Consistency matters more than perfection.
Key Principle
Time is your biggest advantage. Starting with $100/month at age 25 can be more powerful than starting with $500/month at age 40, thanks to compound growth.
Step 1: Protect essentials
Before you start investing for retirement, make sure your foundation is solid:
Emergency fund
Aim for 3-6 months of living expenses in a high-interest savings account. This prevents you from having to withdraw retirement savings during tough times.
Basic insurance
Debt management
Pay off high-interest debt first. There's no investment that guarantees 19% returns (the typical credit card rate), so paying off debt is often your best "investment."
Step 2: Automate saving
Automation removes the temptation to spend money you intended to save. Set up automatic transfers to your retirement accounts right after payday.
Start with employer matching
If your employer offers RRSP matching, contribute at least enough to get the full match. This is free money — often a 50% or 100% immediate return on your contribution.
RRSP vs TFSA for retirement
RRSP
- • Tax deduction now
- • Taxed on withdrawal
- • Best if you're in higher tax bracket now
- • Forced conversion at age 71
TFSA
- • No tax deduction
- • Tax-free withdrawals
- • Best if you expect higher income later
- • More flexible access
The 10% rule
A common guideline is saving 10-15% of your gross income for retirement. If that feels like too much, start with what you can afford and increase by 1% each year.
Step 3: Simple investment strategy
You don't need to be an investment expert. A simple, diversified approach often beats complicated strategies.
Asset allocation by age
A rough guideline for stock/bond allocation:
Keep it simple
Consider target-date funds or balanced portfolios that automatically adjust as you age. These remove the guesswork and rebalance for you.
Milestones by age
Here are rough savings milestones to aim for:
Retirement Savings Milestones
Don't panic if you're behind — these are guidelines, not requirements. Focus on increasing your savings rate and making consistent progress.
Step 4: Review annually
Set a calendar reminder to review your retirement plan once a year. This doesn't need to be complicated:
Annual review checklist
Remember
Retirement planning is a marathon, not a sprint. Small, consistent actions compound over time. The most important step is starting, even if it's with a small amount.
The goal isn't to have a perfect plan from day one. It's to start building good habits and adjust as you learn and grow. Your future self will thank you for starting today.
