It's never too early to start saving for retirement. But your strategy at 25 won't be the same as when you're 65. So here's what you need to do, and when you need to do it, to make the most of your savings.
FIRST DAY ON THE JOB
Sign up for your employer's retirement plan. If you're lucky, you will be automatically enrolled in your company's 401(k) plan. Be sure to contribute at least enough to capture your employer's match.
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AGE 35
Earmark a portion of each raise to your retirement savings. Your ultimate goal: to sock away 15% of your gross income, including your employer's matching contribution.
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AGE 45
Take advantage of your employer's investment-advice program to see whether your retirement savings are on track. Or use our Am I Saving Enough for Retirement? tool.
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AGE 50
Start to make "catch up" contributions to your 401(k) account and your IRA. If you are 50 or older, you can kick in an extra $5,000 (for a total of $20,500 in 2008). You can contribute an extra $1,000 (for a total of $6,000 in 2008) to an IRA if you're 50 or older.
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AGE 55
Take penalty-free distributions from your 401(k) if you leave work and need the money. You'll still owe taxes. The early-out clause does not apply to IRAs.
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AGE 59½
You now can access IRAs and other retirement accounts. Early-withdrawal penalties disappear. If you have a Roth IRA, withdrawals are tax-free.
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AGE 62
Consider taking Social Security benefits, but know that your checks will be reduced by 25% or more for life. If you continue to work, you also will lose $1 in benefits for every $2 you earn above $13,560 in 2008.
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AGE 65-67
Start collecting full Social Security retirement benefits, depending on your birth year. For example, the full retirement age for people born between 1943 and 1954 is age 66. Earnings-cap limits disappear. Don't forget that at age 65, you qualify for Medicare.
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AGE 70
Sign up for Social Security benefits even if you keep working. Extra retirement credits end for those who have delayed collecting benefits.
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AGE 70½
It's time to take minimum distributions from your retirement accounts each year. If you don't withdraw the right amount of money, you'll have to pay a 50% penalty on the amount of money you should have withdrawn but didn't.
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