To retire comfortably, you need to invest in your 20s and 30s.

Not necessarily with money, though. Early contributions to retirement savings are outstandingly helpful, but hard to manage in a time of inflation and high housing costs. It can be just as productive to invest some time in retirement planning at a young age, even a couple of hours.

We know young adults are thinking about retirement because the second most popular episode in the eight seasons of our Stress Test personal finance podcast was titled, “Retirement might look different for Gen Z and millennials. Here’s how to plan for it.”

Here are five additional thoughts for Gen Zs and millennials who doubt they’ll ever retire as a result of today’s financial pressures.

Get your head around the idea of retiring at age 70

The average retirement age gradually increased to 65.1 years last year from 61.6 years in 2000, Statistics Canada says. Expect further increases in the average retirement age because of longer lifespans and a growing recognition of the benefits of staying employed.

One non-financial benefit is that work can keep you engaged and productive. Financially, you have more time to save for retirement, and fewer years of drawing down on your investments and savings. The years from 65 to 70 don’t have to be a continuation of your life’s work. You can taper down by working fewer hours or days.

Plan to earn more

Future pay increases will free up room for retirement saving. What are you doing today to ensure you get those raises in the years ahead? Make sure your boss knows you want to build your career, and ask what you need to do to make it happen. If your current employer offers no real hope of promotions and pay increases, then consider looking for a position with more upside potential.

Pay hikes were almost there for the taking a year or so ago, but the slowing economy has mostly ended that trend. Now, raises are about demonstrating your value as an employee.

Set a timeline for home ownership and starting a family

Without a big salary or parental financial help, it’s unlikely that today’s young adults will have much income to put away for retirement while saving for a down payment and then covering a mortgage and the cost of having young children. It could take 10 years after buying a home and starting a family to find money for retirement.

If you set a rough target date for houses and kids, you can then project when you’ll be in a position to start putting money away. For example: buy a house at 35, aim to ramp up retirement saving at 45. The next key moment for retirement saving is when your mortgage is paid off and you can redirect your monthly payments. If you pay off a house bought at 35 in 22 years by making accelerated biweekly payments, you’re good to start power-saving for retirement at age 57. Retirement at 70 looks fine on this timeline.

Join your company pension or group retirement savings plan

This one will cost you, but the financial benefits are huge with workplace retirement savings programs where employers match employee contributions to some extent. If you contribute a dollar to your company’s pension or group registered retirement savings plan and your employer adds 50 cents, that’s a guaranteed 50 per cent return on your money.

Young adults sometimes resent the idea of having a portion of their pay automatically routed into a pension or group RRSP, because they need the money right now. But passing on matching money from an employer is saying “no thanks” to part of your workplace compensation.

Or, start building your own foundation for retirement saving

Start with as little as $500 or $1,000 and then add whatever you can, whenever you can. A low-cost way to do this kind of sporadic retirement saving is to use a zero-commission stock trading app such as Wealthsimple or TD Easy Trade to buy asset allocation exchange-traded funds. An asset allocation ETF is a fully diversified portfolio with exposure to bonds and stock markets in Canada and around the world.

Try a “growth” asset allocation ETF, which means a mix of 80 per cent stocks and 20 per cent bonds. The ups and downs will be sharp with this mix, but the long-term results should beat more conservative portfolios. Remember, you’re investing for 35 to 40 years.

The Globe and Mail, January 17, 2024