Retirement Planning in Your 20s: Is It Too Early?

Planning for retirement in your 20s isn’t too early. It’s the biggest financial advantage you’ll ever have. Most people in their 20s don’t have money to spare, but they do have the one thing money can’t buy back later: time. A small amount saved at 25 can outgrow a much larger amount saved at 40. So no, your 20s are not too early. They might be the most valuable decade you have for this.

Most Canadians feel behind, and the numbers people picture are intimidating. BMO’s annual retirement survey puts the amount people think they’ll need to retire comfortably at about $1.7 million, and nearly 2 in 3 Canadians worry they won’t get there. The good news: start young, and time does most of the work for you.

Is your 20s too early to plan for retirement?

No. Your 20s are the best time to start, and it isn’t close. The earlier you save, the more years compound growth has to multiply your money, and those early years are worth far more than the ones near the end. The Financial Consumer Agency of Canada says it plainly: it’s never too early, and the longer your money is invested, the more time it has to grow.

Compounding just means you earn returns on your returns. In year one you grow your contributions. In year two you grow your contributions plus last year’s growth, and on it rolls. Early on it feels slow. Decades later it dwarfs what you put in. A dollar you invest at 25 has 40 years to compound. The same dollar invested at 45 has 20. That gap is why a little, started early, beats a lot, started late.

You don’t need a big income to use this. You need time and consistency, and in your 20s you already have the time. Even $50 a month counts.

How much does starting early actually matter?

A lot. Waiting even ten years can roughly cut your retirement savings in half. Set aside $200 a month at a 6 percent average annual return and you’ll have about $398,000 by age 65 if you start at 25, but only about $201,000 if you wait until 35. You contributed just $24,000 more by starting earlier, and you ended up with nearly $200,000 more.

Look at the gap between what you put in and what you end up with. Start at 25 and roughly $96,000 of contributions becomes about $398,000. That extra $300,000 is growth, not money out of your pocket. Start at 45 and there just aren’t enough years left for the snowball to build, so most of your balance is the cash you contributed.

These figures assume a 6 percent average annual return compounded monthly, in line with the long-run equity assumptions in FP Canada’s 2026 projection guidelines. Returns are never guaranteed, markets rise and fall, and your real results will vary. The pattern is what matters, though. Start early and the first years count for far more than the last.

And $200 a month is $2,400 a year, well within the $7,000 you can put in a TFSA in 2026. Save inside a TFSA and that entire balance grows and comes out tax-free. The FCAC’s own example (using a 5 percent return) shows the same thing: reaching a $100,000 goal takes about $243 a month if you give yourself 20 years, but $643 a month if you only give yourself 10. Give yourself more years and you need fewer dollars each month.

Won’t CPP take care of it?

Not on its own. The Canada Pension Plan (or the Quebec Pension Plan, if you work in Quebec) is designed to replace only about a third of your average work earnings, up to a limit. In 2026 the maximum at age 65 is about $1,508 a month, and the average new recipient gets about $925, according to Canada.ca. That’s a foundation, not a full income.

CPP, plus Old Age Security later on, is meant to be a floor you build on top of, not the whole house. The gap between that floor and the retirement you actually want is exactly what a TFSA, RRSP, or FHSA is for. You can start CPP as early as 60 or as late as 70, but starting later doesn’t create money that wasn’t earned. The part you control is what you save yourself, starting now.

Where should a 20-something put retirement savings?

For most people in their 20s, a TFSA is the best first account: tax-free growth, $7,000 of new room in 2026, and you can take money out anytime. Add an RRSP when your income (and tax rate) climb, especially if your employer matches contributions, and an FHSA if a first home is on your radar.

In practice, in your 20s you’re often in a lower tax bracket, so the TFSA’s tax-free withdrawals usually beat the RRSP’s deduction now, which is worth more when you earn more. But if your employer matches RRSP contributions, take that first, every time. A 50 percent match is an instant 50 percent return you can’t get anywhere else. And the FHSA pulls double duty: use it for a first home, or, if you don’t buy, roll it into your RRSP later. (Quick housekeeping: the RRSP deadline for the 2025 tax year is March 2, 2026.) For where to actually hold this money, our roundup of the best savings apps in Canada breaks down rates and accounts.

How do you actually start in your 20s?

Start small, automate it, and raise it with every paycheque bump. The amount matters less than the habit. The Canadian household saving rate was just 3.5 percent in early 2026 (Statistics Canada), and the fix is rarely willpower. It’s setting up an automatic transfer so saving happens before you can spend.

• Pay yourself first. Set an auto-transfer for payday so the money moves before you see it. The FCAC calls this one of the simplest ways to actually save.
• Start with a number you won’t miss. Even $25 a week is a start. Bump it 1 percent every time you get a raise, and you’ll barely feel it.
• Grab the employer match. If your job offers a group RRSP match, that’s free money and an instant return. Don’t leave it on the table.
• Handle debt and an emergency fund alongside. Knock down high-interest debt like credit cards and build a small cushion in parallel, not instead of saving. Even a tiny retirement contribution keeps the habit alive.
• Keep it boring on purpose. Automatic, consistent, and forgotten about is exactly what makes compounding work. Let the math be the exciting part.

None of this requires a finance degree or a big salary. It requires showing up with a small amount, automatically, for a long time.

How Lodavo fits in

The hard part of retirement saving isn’t the math. It’s sticking with a quiet, automatic habit for 40 years when nothing flashy happens for a long while. That’s the part Lodavo is built to help with.

Lodavo is Canada’s first prize-linked savings app, and it makes that slow, invisible habit feel rewarding right now. You track your savings progress in the app, and the more you save, the more tickets you earn in a free weekly draw. Every week, a member wins up to $10,000, and a guaranteed prize of at least $100 always goes out.

Even a small step forward earns you tickets, so a goal that is decades away gives you something to feel good about this week. Saving stops being the boring thing you know you should do, and the weekly draw keeps you coming back to it. You can see past winners on the winning numbers page, and if you’re curious how prize-linked savings works, our guide to prize-linked savings in Canada walks through it.

The bottom line

Retirement in your 20s feels impossibly far away, and that is exactly why it works. You have time on your side, the one input compounding cares about most. Open a TFSA, automate a small transfer, grab any employer match, and let it run for four decades. The version of you at 65 will not believe how little it took to get there.

Ready to make saving something you actually look forward to? Download Lodavo free on the Apple App Store or Google Play Store and start earning free tickets just for building the habit.

Terms and conditions apply. No purchase necessary (alternate method of entry available). Skill-testing question required. Open to legal residents of Canada who are the age of majority. Odds depend on the number of eligible entries received. Full rules and odds here.