This is a guest post from Sarah M. Place, President and CEO of Place Trade Financial (Member FINRA/SIPC).  Sarah’s blog is another great place to find useful money help on a variety of topics.

When I was in my early twenties my grandmother sat me down for a serious talk about saving for retirement.  I remember my eyes glazing over and thinking – why are you telling me about this?  I am not going to get old.

Over the years I have met several people in their 50s and 60s who have enjoyed life, spent their fortunes keeping up with the Joneses and who sadly have little set aside for retirement.  After very sobering discussions about their situations – they always say “I wish that someone had told me about this when I was in my twenties!”   My question then is “But would you have listened?”

With the need to replace 100% or more of pre-retirement income to fund your retirement lifestyle, with pensions disappearing and the question of whether or not social security will be there when you retire, now is a great time to check out how easy it is to start and maintain a retirement account.

The two most common ways to invest for retirement are via your employer’s 401(k) plan or through a self directed traditional or ROTH IRA.

A 401(k) is a tax deferred retirement program that is available through most large employers and may generally be set up in a few minutes.   Most plans offer a variety of different mutual funds and sometimes include a company’s stock.

Unfortunately many younger workers are missing out on the great benefits of investing in 401(k)s including:

• Contributions are made with pre-tax dollars (you don’t pay any current federal income taxes on the money that you contribute to your 401(k) – making the hit on your paycheck seem a little less painful).

• Investments inside of your 401(k) enjoy tax deferred growth (taxes will not be paid until the money is withdrawn)

• Free money.  What?  Did you say free money?  Most employers will match your contributions (they will give you money when you save money for yourself) for example your employer may match you fifty cents on every dollar that you contribute up to 6% of your income.  A 50% match is like increasing your returns by 50% in the first year.

If your employer does not have a retirement plan or you are not happy with your options (like too few investment choices, poor performing investments or no employer matching of contributions, etc.), you may consider a traditional (or Roth IRA) instead.

Self-directed IRAs offer benefits including;

• May be held at the bank or brokerage firm of your choice

• Contributions are made with pre-tax dollars

• Offer the benefits of tax deferred growth

• Freedom to choose from a greater variety of investments including CDs, bonds, mutual funds, options, stocks, money markets and more.

For more information on IRAs or Roth IRAs please visit www.irs.gov or my site.

Savings Tips:

• Contribute the maximum to your retirement plan and have 401(k) contributions taken out evenly throughout the year to take full advantage of the match.

• Review your choices carefully and consider your personal risk tolerance and objectives prior to investing.

• Never put all of your eggs in one basket or feel pressured to put money into your company’s stock.

• Never cash out your 401(k) – no matter how small!  Younger employees make up the majority of individuals who cash out their retirement plans – likely because they do not realize how much their nest egg could grow between today’s emergency and tomorrow’s retirement.

• Instead of cashing out- consider rolling your 401(k) into an IRA or your new employer’s plan (if eligible).

• Review your 401(k) at least annually and be sure to rebalance your investments as they grow to keep them in line with your goals and investment objectives.

Regardless of which type of retirement plan that you choose- the important thing to do is to get started and to take advantage of your greatest asset – time.

Sarah M. Place, MBA, President and CEO of Place Trade Financial (Member FINRA/SIPC) is a national expert with nearly twenty years experience in the financial services industry. She has been honored to be included in several important news services and publications including ABC 11 Eyewitness News, CNBC.com, a national non-profit consumer magazine and The News & Observer.