Sure, you want to experience a financially comfortable retirement, and you know you've got to save to reach your goals.
But that's not enough. You need to prioritize your "to do" list when it comes to stashing your cash in order to amass as much as possible over your lifetime. You already know to snag free money by contributing enough to your 401(k) plan to receive the full company match. Here are some other important steps:
1. Maximize 401(k) savingsThis year individuals can save up to $15,500 in a 401(k). For folks over 50, the limit is $20,500.
If it's not possible to hit the maximum limit, at least you can add to your savings when you get a raise.
Even small savings increases make a huge difference over time. For example, assuming an average annual return of 8 percent a year, a 30-year-old who saves $3,000 a year for 40 years will amass roughly $810,000 by age 70½, when withdrawal of assets must begin. Salting away just $1,000 more each year results in a nest egg of more than $1 million.
2. Snag permanent tax breaksLook for other savings opportunities with tax perks. One of the best? The Roth IRA, says Ed Slott, author of "Your Complete Retirement Planning Road Map."
Slott loves the Roth because your earnings grow tax-free forever. "You take away the uncertainty of what future tax rates might be," he says.
And unlike other accounts, you never have to take withdrawals, so you can leave them untouched for your heirs.
3. Consider other IRAsIf your income exceeds a certain amount, you may not be eligible to fund a Roth. This applies to single individuals with incomes in 2008 topping out at $114,000 and married couples filing a joint return with incomes up to $166,000.
That doesn't mean you have to give up tax-friendly savings. You may be able to fund a traditional deductible IRA. But if you (or a spouse) are already enrolled in an employer retirement plan, you face income restrictions there too.
A nondeductible IRA lets earnings grow tax-deferred, meaning you won't pay taxes on earnings until they're withdrawn. Bonus: In 2010, you can convert these IRA assets to a Roth IRA, regardless of your income, thanks to new rules.