How to Start Saving for Retirement

The "I haven't started yet" guide: why the first decade of compounding matters most, why the employer match comes before every other decision, the 4-vehicle priority order, the 15 to 20 percent savings target, and exactly how to open the accounts in the US and Canada.

Run the Roth-vs-Traditional question through the Retirement Account Comparison Calculator, and track contributions year over year with the printable Retirement Contribution Tracker.

The short version

Start this month, capture the employer match, then automate. The order: grab any employer match (free 50 to 100 percent return), then fund a Roth IRA in the US or a TFSA and FHSA in Canada, then add to the 401(k) or RRSP beyond the match, then a taxable account once the sheltered limits are full. Put the money in a broad index fund or a target-date fund, aim for 15 to 20 percent of income, and let the first decade of compounding do the heavy lifting.

Capture the match. Set your workplace contribution to at least the percentage your employer fully matches. This is the highest-return step and it comes first.
Open a Roth IRA (US) or TFSA + FHSA (Canada). Ten minutes at a discount broker. Fund it by automatic transfer from checking.
Buy the index fund. Contributing is not investing; place the trade into a total-market or target-date fund so the cash is actually working.
Automate and escalate. Set a recurring contribution and raise it with every pay increase.
Aim for 15 to 20 percent of gross income including the match, and increase the rate if you started after 35.

Why the first decade matters most

Every advisor reaches for the same illustration because it is the most important idea in retirement saving:

The early starter who quits still wins. An investor who contributes $5,000 a year from age 25 to 35, then stops completely (just $50,000 contributed, 10 years), typically retires at 65 with MORE than someone who contributes $5,000 a year from 35 to 65 ($150,000 contributed, 30 years). At 7 percent, the early starter's $50,000 grows to roughly $560,000 by 65; the late starter's $150,000 reaches roughly $510,000. Ten years of head start, one third of the contributions, more money. That gap is compounding, and it is unrecoverable once the years pass.

Compounding is front-loaded. At 7 percent money roughly doubles every decade, so the dollars you invest first get the most doublings. A dollar at 25 sees about four doublings by 65; a dollar at 55 sees one.
Time in the market beats timing it. Waiting for a better entry point usually costs more in missed compounding than it saves in avoided dips. Consistent contributions through good and bad years win for almost everyone.
The practical takeaway: the best day to start was years ago; the second best is today. Even a small automatic contribution started now beats a larger one you keep postponing.

Employer match first, and the math reason

Before any Roth-versus-Traditional debate, before any fund selection, there is the match. It is the only guaranteed instant return in personal finance:

The match doubles your money on day one. A common formula is a 50 percent match on the first 6 percent of salary. Contribute 6 percent and your employer adds 3 percent, so 6 percent of pay becomes 9 percent in the account, a 50 percent return before the market does anything. Some employers match 100 percent up to a cap, which doubles your contribution outright.
It outranks every other step. No index fund, no Roth advantage, no rate assumption competes with a guaranteed 50 to 100 percent. Leaving the match on the table is the most expensive common mistake in retirement saving.
Find the exact formula. Your plan documents or HR portal state the match percentage and the cap. Set your contribution to at least hit the full match, then move on to the next vehicle.

The 4-vehicle priority order

1. Employer match. Usually 3 to 6 percent of salary. Max it first, always. Free money.
2. Roth IRA (US) or TFSA + FHSA (Canada). $7,000 US Roth IRA limit; $7,000 TFSA plus $8,000 FHSA in Canada. Tax-advantaged, flexible, and easy to open at any discount broker. The FHSA is first for Canadian first-time buyers because it is deductible going in AND tax-free coming out.
3. 401(k) or RRSP beyond the match. Higher limits and tax-deferred growth. Use this once the Roth or TFSA is full and you want more retirement room.
4. Taxable brokerage. After the sheltered limits are maxed. No tax shelter, but no withdrawal restrictions either, which makes it useful for goals between now and retirement.

See the after-tax winner for your own brackets in the Retirement Account Comparison Calculator before deciding between the Roth and Traditional flavors of step 3.

The 15 to 20 percent savings rate target

The savings rate, more than fund selection, decides whether retirement is on track. Calibrate it by your starting age:

Start age	Target rate (incl. match)	Reality
25	15%	A 15% lifetime average gets there comfortably with four decades of compounding
35	20 to 25%	One lost decade means a higher rate to cover the same target
45	30%+ catch-up	Hard but doable for higher earners; lower earners lean more on Social Security or CPP and OAS

Count the match in the rate. If you contribute 12 percent and the employer adds 3 percent, your savings rate is 15 percent.
Escalate automatically. The easiest way to reach 20 percent is to raise the rate one point with every pay increase; you never feel the money you did not get used to spending.
The government leg is real. Social Security (US) and CPP plus OAS (Canada) replace a meaningful share of pre-retirement income, more for lower earners. They are a floor, not a plan, but they change how much personal saving a late starter actually needs.

Index funds vs target-date funds vs picking stocks

Index funds: the default for 95 percent of investors. A total market fund plus international plus bonds gives broad diversification at rock-bottom fees (often a 0.03 to 0.10 percent expense ratio). Best long-run performer for almost everyone, with one small chore: you rebalance occasionally.
Target-date funds: the one-decision option. A single fund (for example a 2055 or 2060 dated fund) holds the whole index mix and shifts toward bonds automatically as the date approaches. Fees run a little higher (0.10 to 0.50 percent), but it removes every allocation and rebalancing decision. Right for set-it-and-forget-it savers.
Picking stocks: don't, for retirement money. About 95 percent of professional active managers trail the index over 15-plus-year periods. Choosing your own individual stocks is gambling with the money you cannot afford to gamble. Keep any stock-picking itch to a small play-money account outside the retirement plan.

The Big Three index funds

US: VTI + VXUS + BND. Vanguard Total Stock Market (0.03 percent), Vanguard Total International (0.07 percent), Vanguard Total Bond (0.03 percent), all available commission-free at Vanguard, Fidelity, Schwab, and E*Trade. A simple allocation rule is stocks percent = 110 minus your age (a 30-year-old holds roughly 80 percent stocks and 20 percent bonds), with the stock sleeve split roughly 60/40 US to international.
Canada: VFV + XAW + VAB. Vanguard S&P 500 in CAD, iShares Core MSCI All-World ex-Canada, and Vanguard Canadian Aggregate Bond, available at Wealthsimple Trade (commission-free), Questrade ($10 per equity trade but free ETF purchases), TD Direct Investing, and RBC Direct Investing. Or skip the assembly with a one-fund solution: VEQT (all equity) or VBAL (60/40), which rebalances itself.
Important Canadian note: US-listed Vanguard funds (VTI, VXUS, BND) are not the right choice inside Canadian tax-sheltered accounts; use the CAD-listed equivalents above so currency and tax treatment line up.

How to actually open the accounts

US Roth IRA (Fidelity, Vanguard, Schwab). About 10 minutes online. You need a Social Security number, employment information, and a beneficiary. Fund it by ACH transfer from your bank, then place a trade into your chosen fund.
US 401(k). Through your employer's HR or benefits portal. Set your contribution percentage to capture the full match, choose an investment allocation (a target-date fund if unsure), and name a beneficiary.
Canadian TFSA (Wealthsimple Trade). About 5 minutes online. You need a Social Insurance Number and employment information. Wealthsimple Trade is the easiest on-ramp for new Canadian investors; Questrade and the big-bank discount brokers work too.
Canadian RRSP. Same process at the same brokers. Your contribution room (18 percent of earned income, carried forward) appears on your CRA Notice of Assessment.
Canadian FHSA. Opened separately, often at the same broker. If you are a first-time buyer, fund this first; the contributions are deductible and the withdrawals are tax-free for a first home.
The step everyone forgets: contributing money does not invest it. After the cash lands, place the trade into your index or target-date fund, or it sits earning nothing.

Catch-up contributions for late starters

US, age 50+. Add $7,500 a year to a 401(k) and $1,000 a year to an IRA on top of the standard limits, plus $1,000 a year to an HSA at 55 and older. These exist precisely for people who started late or want to accelerate in their peak-earning years.
Canada. No formal catch-up, but the system is forgiving: unused RRSP room carries forward indefinitely, and TFSA room has accumulated every year since 2009 for anyone 18-plus throughout. A late starter with strong income can deploy a large amount of accumulated room quickly.
Strategy for a late start: a higher savings rate, full use of catch-up or carried-forward room, and a realistic plan that counts Social Security or CPP and OAS as a larger share of the income floor.

The Canadian RRSP-vs-TFSA decision

First-time buyer? Fill the FHSA first. $8,000 a year, $40,000 lifetime, deductible going in AND tax-free coming out for a first home. Nothing else stacks both benefits.
High bracket now (33 percent-plus), lower expected in retirement: prefer the RRSP. The deduction is worth more today than the tax will cost on withdrawal, the same logic as Traditional-over-Roth.
Low bracket now (under 25 percent), higher expected later: prefer the TFSA. No deduction now, but the growth and withdrawals are tax-free when your rate is higher.
Uneven spousal income: consider a spousal RRSP. The higher earner contributes to the lower earner's RRSP, splitting income in retirement and lowering the household tax bill.
Government benefits in play: lean TFSA. TFSA withdrawals do not count as income, so they avoid OAS clawback (above roughly $87,000) and do not reduce GIS; RRSP withdrawals do count. For lower-income retirees this can outweigh the raw bracket math.

Common mistakes

Waiting until you "have more money" or "next year." The compounding you skip in your twenties cannot be bought back later. Start with whatever you can automate now.
Too conservative for your age. Holding mostly bonds or cash in your 20s and 30s is its own risk: it locks in low returns over the decades that should be your most aggressive.
Panic-selling in a downturn. Selling after a drop converts paper losses into real ones at the worst possible time. The plan is to keep contributing through the dip.
Concentrating in employer stock. Enron and Lehman employees lost both their jobs and their retirements at once. Keep company stock to a small slice, not the core.
Skipping the Roth or TFSA because "it's only $7,000 a year." That $7,000 at 7 percent for 40 years is roughly $100,000 after tax. The small annual number is the point of compounding, not a reason to dismiss it.
Forgetting to invest the cash. The most common rookie error: money sits in the Roth IRA or TFSA as cash because no one placed the trade. The account does not buy the index fund for you.

FAQ

How much should I be saving for retirement?

Aim for 15 to 20 percent of gross income, including any employer match, but the right number depends on when you start. Starting at 25, a 15 percent lifetime average usually gets there. Starting at 35, plan on 20 to 25 percent. Starting at 45, you are into 30 percent-plus catch-up territory, which is hard but doable for higher earners, and for lower earners means leaning more on Social Security or CPP and OAS as a larger share of retirement income. The single biggest lever is starting: a decade of early contributions compounds more than two decades of later ones.

What should I invest in once the account is open?

For most people, low-cost broad index funds or a single target-date fund. In the US that means a total US market fund plus a total international fund plus a bond fund (VTI, VXUS, BND), or one target-date fund that holds all of that and rebalances for you. In Canada the tax-sheltered equivalents are VFV, XAW, and VAB, or one-fund solutions like VEQT (all equity) or VBAL (60/40). A useful starting stock allocation is roughly 110 minus your age in stocks, the rest in bonds. Picking individual stocks is not investing for retirement, it is gambling: about 95 percent of professional active managers trail the index over 15-plus years.

Should a Canadian use an RRSP or a TFSA?

Follow the bracket arc. If you are a first-time home buyer, fill the FHSA first ($8,000 per year, $40,000 lifetime, deductible in and tax-free out for a first home). Then: if you are in a high bracket now (33 percent-plus) and expect a lower one in retirement, prefer the RRSP for the deduction; if you are in a low bracket now (under 25 percent) and expect a higher one later, prefer the TFSA. Two tie-breakers: a spousal RRSP can split income in retirement when one spouse earns much more, and TFSA withdrawals do not count as income (so they avoid OAS clawback and GIS reduction) while RRSP withdrawals do, which matters a lot for lower-income retirees.

What if my employer does not offer a match or a plan?

You can still do almost everything on your own. In the US, open a Roth IRA (or Traditional IRA) at any major discount broker and contribute up to $7,000 per year; if you have self-employment income, a SEP-IRA or Solo 401(k) allows much larger contributions. In Canada, open a TFSA and an RRSP (and an FHSA if you are a first-time buyer) at a discount broker; RRSP room is 18 percent of earned income whether or not an employer is involved. The employer match is the only piece you cannot replicate, which is exactly why you grab it when it exists, but its absence does not stop you from building a full retirement plan with the other vehicles.

I'm starting late. Is it too late to bother?

No. Starting at 45 or 50 means a higher savings rate and leaning more on guaranteed government benefits, but every dollar invested still compounds, and the catch-up rules exist for exactly this situation: US savers 50 and older can add $7,500 to a 401(k) and $1,000 to an IRA each year (plus $1,000 to an HSA at 55-plus), and Canadians carry unused RRSP and TFSA room forward indefinitely, so a late start with strong income can deploy a large amount of room quickly. The worst move at any age is waiting longer; the second worst is staying in cash out of fear. Start the automatic contribution this month and increase it with every raise.

Bottom line

Retirement saving is mostly a sequence, not a stock pick: capture the employer match, fund a Roth IRA or TFSA and FHSA, add to the 401(k) or RRSP beyond the match, then use a taxable account, and buy a broad index fund or a target-date fund at every step. Aim for 15 to 20 percent of income, more if you started after 35, and automate it so the decision happens once. The first decade of compounding matters most, which means the highest-value move available to you is to open the account and set the automatic contribution this month, then let time do the work.