If your employer offers a tax-sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate.

Ask Your Employer To Start A Plan

If your employer doesn’t offer a retirement plan, suggest that it start one. Simplified plans can be set up by certain employers. For information on simplified employment pensions, order Internal Revenue Service Publication 590 by calling 1.800.829.3676. Or you can view a copy on the IRS Web site. You may also want to request a copy of Choosing a Retirement Plan for Your Small Business.

Put Your Money Into An Individual Retirement Account

You can put up to $3,000 a year into an Individual Retirement Account (IRA) and gain tax advantages. The chart below illustrates the way your account can grow in an IRA.

When you open an IRA, you have two options – a traditional IRA or the newer Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, you should know that the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose.