First off, congratulations, because I know that when I graduated from college the absolute last thing on my mind was saving for retirement. I did, however, sign up for the default contribution level of my 401(k) plan and so,
1. Make it as easy as possible – If you’re employed then take advantage of whatever plan your employer offers and choose investments that you won’t have to look at again, like an index fund. If you want more then up the contribution but don’t over-think things, at least at first.
2. Avoid consumer debt – If you can’t pay off your credit cards each month then you are already drowning in debt, you just don’t know it yet.
3. Buying too much house is even worse than consumer debt – It really is silly how normally prudent people can justify buying a house that is way beyond their means just because they call it an “investment.” It’s not; it’s a place to live. My grandfather never took out a mortgage in his life.
4. Keep some cash handy – life will present you opportunities and challenges that can only be taken advantage of with cold hard cash. Plus it will make you feel warm and fuzzy to look at your bank account and see some savings in it.
5. Have fun along the way – whether it’s trying out some more exotic investments, starting your own business, or putting extra money in for an early retirement, don’t forget that getting there is half the fun.

Take a look at this article that I wrote for more information http://www.webbizfinance.com/2010/09/retirement-tax-planning/

Teresa Dentino

CEO and Founder, The Financial 411

Posted on Feb. 24, 2011

I recently gave a lecture at a college and the main question of the students I spoke with was whether to wait to start investing until AFTER their student loans had been paid off. I mention this as it is applicable to your question about starting retirement savings. Contrary to what the consensus view may be, my opinion is that you absolutely start an investment plan immediately and simultaneously with paying down debts – even school loans. The pay-off is too great, and the benefits occur on more than the obvious level as follows:

1) Not only in terms of the most obvious i.e. having the investment and its performance over a longer period of time, but equally important - if not more so - is that you are developing the habit of always investing. Why do I say that in the face of the consensus opinion? Because I’ve witnessed that for most people the most common challenge is getting started! And, because it’s true that: once you’ve started there is a much higher probability that you will continue.

2) Another huge benefit of starting as soon as possible is that much of the savvy that you will develop around investing and money management comes from having ‘skin in the game’. In other words, you can read about investing; listen to a lecture about it, etc., but much more learning comes from being ‘invested’ in the process.

3) Waiting ‘until our bills’ are paid is a trap – When are our bills ever paid? There will always be an expense or purchase we’re likely to put ahead of setting aside money for investing/retirement.

4) How to Achieve This:

The good news is that there are companies out there that allow you to set up an investment account where you can start the account with even as little as $25.00/mo. and arrange for automatic and subsequent investments to that account in the same dollar range (you actually choose the amount and can change it at any time). This overcomes another barrier: The myth that ‘I have to save up a lot of money’ in order to get in the game. The other important aspect and resulting benefits of this process is that you effectively set up an auto- deduction from your checking/savings account – the timing also at your discretion - making the process painless and disciplined over time. (Refer to my blog post for more about the power of a 401k)

5. From a more tactical standpoint, if you have recently started your career and your company provides a 401(k) plan, you absolutely want to maximize that opportunity. Both for the obvious benefits of tax-deferral - and the greater growth that can occur as a result - but especially so if the company is offering any kind of matching of your contributions. The matching dollars are coming from the company – not out of your pocket –so that’s essentially a gift of free money. Who doesn’t want that?

I have seen as much wealth created from non-professional individuals who routinely participated and contributed (discipline) to their 401(k) over the long haul as from anyone who might be considered an investment guru. In other words “consistency”, “discipline” and “long-haul” equal or trump innate stock picking ability.

You can also set up an individual IRA account even if you’re participating in your Company’s 401K. The maximum contribution limit is the same for everyone; your earnings will determine whether the entire contribution is deductible on your Federal taxes, but you still get the tax-deferral on your account.