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Saving for retirement: What do I do first?

Through your entire life - thus far-- you've followed the directions and reaped the rewards: go to school and graduate, attend college and get a job. However, now that you've passed all of those hallmarks of adulthood, what do you do next?

Perhaps your employer offered you the chance to sign up for a 401K plan, or invited you to an information session regarding pensions. You may have heard about the need for an estate plan, but you have not gotten married or don't have kids quite yet. It all seems too far away. You're going to retire in what year? 2060? How do you possibly plan for something so far away? Why should you even think about it now?

Start saving now

While the stock market is always in the headlines with dire warnings of giant losses, the beauty of long-term investment strategy is that ultimately the market statistically goes up.

The other wonderful thing is called compounding interest. When you start your retirement plan in your twenties and add just a few dollars every week, those dollars have years to accrue, earn interest and then add more interest on top of the old. The interest you accrue on the account is essentially "free money" and will significantly increase your holdings as the decades go by.

When you wait to start saving, all those lost years of interest simply vanish. A dollar that could have been worth hundreds is just a dollar.

Ten percent of your Income is a good goal

When handed an enrollment packet, the options of how much to put into the 401K and where can be baffling. Experts have long agreed that by putting away 10 percent of your paycheck before taxes will result in a healthy nest egg - and something to actually protect with an estate plan.

Some companies offer matching funds. If they match up to 3 percent, you can make that part of your total of 10 percent. You would only need to mark down 7 percent for the withholding or you could allocate some to a Roth IRA (and have withdrawals tax-free later).

Having the money taken out of your paycheck is an excellent means of ensuring you are taking care of your future, without falling victim to the "I'll pay it back next week" mentality that can befall somebody who is filling up the piggy bank at home before making a single deposit.

Begin by saying, "Yes"

Another problem with the paperwork you have to fill out to participate in a company savings plan is deciding on which approved fund you want to put your money. Do not sweat the details if it is going to stop you from turning in the form. You can change your selections later, after getting professional advice, to optimize the return on your investment. When unsure, check off one fund - low risk is always a good start - return the form to HR and start saving.

Now you are on the right path. It is always the first step that is the hardest, but ultimately the most important. Start saving today.

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