Tax-Advantaged Account

• When getting started with retirement planning, it is important to choose a tax-advantaged retirement account to use for saving. There are several different types of retirement accounts that you could potentially choose from. For example, the IRA and 401(k) provide you with a way to set aside money on a pre-tax basis. The Roth IRA and Roth 401(k) allow you to save money on an after-tax basis. With the IRA and 401(k), you have to pay taxes on the money only when you retire. With the Roth accounts, you will have no tax liability once you reach retirement age.
  
  

Maximum Contributions

• When saving for retirement with a retirement account, it is important to maximize your annual contribution. Each type of retirement account comes with a maximum annual limit that you must abide by. As of 2010, with the IRA or Roth IRA, you could contribute as much as $5,000 per year. This limit jumps up to $6,000 per year once you hit age 50. With the 401(k), you can contribute up to $16,500 per year or $22,000 per year if you are older than 50.
  
  

Asset Allocation

• When you start contributing money to a retirement account, you can use that money to invest in different types of securities. The way that you allocate that money will play a vital role in the success of your investments. Putting more money into fixed-income investments as you get closer to retirement can lower the amount of risk in your portfolio. Younger investors typically prefer to invest the majority of their funds in equities so that they can grow their account faster.
  
  

Borrowing

• With 401(k)s, you can typically borrow from your retirement account balance in the form of a 401(k) loan. If you have an IRA, you may access the money for some type of hardship or by cashing out your account. While these options are available to you at any time, you should most likely avoid exercising them. If you do not repay the 401(k) loan, it will be treated as a taxable distribution. Any distributions will include a 10 percent early distribution penalty as well as paying taxes on the amount that you take out.
  
  

Matching

• If you have the option to participate in an employer-sponsored retirement account, you may be wise to do so. For example, many employers offer 401(k)s for their employees. These accounts make it possible for you to defer a portion of your income to them. Then the employer also has the option to match your contribution. If this is the case, it can significantly increase your retirement savings without any additional work.