Money Matters: Saving for Retirement

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We've talked before about how important it is to save when you're young for your future retirement.

Even though the stock market has been on a roller coaster, you still need to think about the future while time is on your side. Mark Miller from Reuters says there are six important retirement moves you need to make while you're young.

1. Start early, start small

Nothing will have a greater impact on your success due to the effects of compound returns over time. A contribution of $5,000 today at age 23 will be worth nearly $300,000 when you retire at age 70 assuming a 9% return.

2. Save as much as you can

Investment analysts say starting early and your investment rate have a much larger effect over time than the market does, and by saving more you can pursue a less aggressive portfolio reducing your risk.

3. Don't cash out

There will be temptation, but don't cash out your 401k when changing jobs no matter how small the balance. Roll over to your new employer's account or a low cost stand alone IRA. You don't want to interrupt the flow of compound returns.

4. Get the match

Make sure to contribute enough to max out any matching contribution from your employer on your 401k. Otherwise you're leaving money on the table.

5. Monitor fees

The total cost of workplace funds vary widely from well below 1% to a whopping 5%. Whenever possible, seek out low cost index funds to get the most bang for your buck.

6. Use a Roth

If your workplace plan doesn't offer a Roth IRA consider contributing to a stand along Roth IRA. Roth contributions grow tax free. You can contribute up to $5,000 annually no matter what you're doing in your workplace plan as long as your income is below $110,000 for a single person or $173,000 for a married couple.

So get cracking! Save now, because retirement age will be here before you know it.


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