A Guide To Jumpstarting A Retirement Plan In Your 20s

Starting a life can get in the way of planning one. The need to find a job and a place live, not to mention food or premium cable—you know, the necessities—take priority in your 20s. At the expense of a sensible strategy for future well-being.

Too few 20-somethings pay any mind to a retirement plan. Indeed, when Scottrade two years ago interviewed a group of Generation Y—those born roughly from 1980 to 2003—they discovered that 60% don't think about it at all. More than half hadn't started saving.

Lazy, not to mention anxious. Pew Research the following year found that 35% of those ages 18 to 34 are not too confident or not confident at all about retirement. By contrast, when Pew conducted the same survey in 2009, 26% of 18- to 34-year-olds reported feeling that way.

Creating a plan is certainly chock full of unpleasantness. How much should I save—how much can I save? TFSA or RRSP?

Wait? , four-oh what...

Below, some steps for the eager 20-something to complete. Do it now, and your biggest aged worries will be canasta tournaments, not whether you can make it.

"You spend a little bit of time crunching the numbers, and you can see how a little bit can go a long way with time," says Bernie Petkau a senior investment advisor and certified financial planner. "When you’re getting to the point where I am in life, you realize how it can pay off. You want to look back with a smile and not look back with regret."

Save A Little. Save Often

Habits are hard to break. Make saving a little from each paycheck one. Someone who saves a bit for a long time is better off than a person who starts later and must save more.

Ideally, experts say, you should stash 10% of your income during your 20s. As you age, that percentage can grow—to 15% to 20% in your 30s. Use this to establish a rainy day fund. Again, in a perfect situation, you'd have enough to pay rent, food and other essential bills for three to six months. Those in more volatile industries—a start-up employee, for example—are encouraged to tuck away more.

Remember, the longer you delay establishing savings, the greater the paycheck pinch later in life. "Those who start early just don't end up missing it as much," says Catherine Collinson, Transamerica Center for Retirement Studies president. Troublingly, when Scottrade asked what age a person should begin retirement savings, Gen Y respondents replied 29. Start earlier than that.

Consider what twins Jennifer and Amber did here in our example

Also Explore Corporate Retirement Benefits

Pension plans seem antiquated. Now, it's a boon if a company offers a RRSP plan and a match. Fortunately the number of businesses with a RRSP grows by 25% each year, according to T. Rowe Price.

Considering two nearly identical job offers? "You need to learn more about those benefits. Less than 30% of employers don’t match. Some offer only as little as 1%," says Collinson. "A job with a little less pay with more retirement benefits could be more attractive on a compounding basis."

It's a scary fact that most young adults don't contribute if they aren't automatically enrolled. Wells Fargo found that just 13% of Millennials successfully signed up for a company RRSP when there was no automatic enrollment.

That said, you must take advantage of a RRSP if it's offered. Only contribute as much as the company will match.

…Then MAXIMIZE TFSAs

When you withdraw money from a RRSP plan later in life, the funds will be taxed like income. Unless all is awry, you'll probably be in a greater tax bracket than when you first began pouring money into the fund. I haven't heard of taxes going down.... have you?

TFSA withdrawals, meanwhile, are 100% tax-free, USE THESE FOR SAVING FOR A CAR, HOUSE, BOAT, RETIREMENT. . So, put your additional savings into the TFSAs, not the RRSPs.