I'm 25, should I start saving for retirement?

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Now is the perfect time to start saving for retirement. First - separate out the idea of accounts (401K, Roth IRA, savings) and the vehicles you can hold in those accounts (stocks, bonds, mutual funds, ETFs, CDs etc.)

401K - retirement savings acct, the income you use to contribute is not taxed (this is called pre-tax dollars), but you pay taxes on withdrawals, you can borrow from this acct in certain hardship situations, but can't withdraw $ until you're 59 1/2. You can contribute up to $16,500/yr. up to age 50.

Roth IRA - retirement savings acct, the income you contribute is taxed (this is called after-tax dollars), but you don't pay any taxes on withdrawals, you can withdraw $ before 59 1/2 with a 10% penalty. You can contribute up to $5000/yr up to age 50.

Bank acct - a non-retirement savings, CD, or checking account, you contribute with after-tax dollars, you pay taxes on any interest earned in the year it's earned, you can withdraw whenever you want. Interest rates are relatively low. Money in CDs or savings accounts is insured up to whatever the current FDIC limits are.

Brokerage acct - a non-retirement account where you can buy, sell and hold stocks, bonds, CDs, mutual funds, etc; you deposit after-tax dollars, and pay taxes on interest & dividends earned & any capital gains from selling appreciated investments in the year earned. Better rate of return than bank accounts, but stocks & bonds are riskier than savings accts.

Overall, the differences lie in how much you can contribute, when the money you contribute and any earnings/growth is taxed and what the limitations are on getting the money out. My opinion (and I followed this plan & retired at 53):

1. Take advantage of your company's contribution - don't leave that money on the table. Contribute at least 6%.
2. Money you put in a 401K doesn't get taxed until you withdraw it - so contribute as much more than 6% as you can afford and the law allows. You not only still have the money you sock away, but you lower your current income by the amount you contribute & so pay less tax today.
Caveat: once your money is in a 401K, it's hard to get it out again until you're 59 1/2, so before you contribute MORE than 6%, build yourself up a little nest egg, of say 6 months worth of expenses, in a nice safe bank savings account or in a nice safe vehicle (CD or money market) in a brokerage acct. This will tide you over if you get laid off.
Caveat: Stay away from your employer's stock in a 401k. You have enough invested in your job there already.
Caveat: Investing in your 401K assumes that it has an acceptable offering of various stock & bond mutual funds; if it doesn't, you may want to go with the Roth after you put 6% in your 401k.
3. If you have the money, consider a Roth IRA at a brokerage like Charles Schwab. You'll have access to many different investments (stocks, bonds, mutual funds, CDs, etc.), their expenses are relatively low, and their website has great information & research capabilities.
4. If you still have money to save, open a non-retirement account at a brokerage like Charles Schwab.

Investment Vehicles:

Stock - you're essentially buying a little piece of a company in the hopes that it will become more valuable and/or pay you a quarterly dividend.
Bond - you're loaning money to a company that will pay you interest on it & return your principle when the bond matures
CD - you're loaning money to a bank that will pay you interest and your money is insured against loss up to current FDIC limits
Mutual fund - essentially an investment consisting of a "basket" of stocks and/or bonds that are selected by a manager according to the goals of the fund. Some funds invest in big companies, some in small companies, some in bonds, some in various mixes.
Index funds - Mutual funds designed to track stock market indices like the Dow Jones or the S&P 500 or the Nasdaq. They essentially hold stock of the companies that make up an index, in the proportion they exist in the index.
ETFs - Like index funds, but bought & sold slightly differently.

To the extent you can, until you know more about investing, build yourself a well-diversified portfolio of index funds or ETFs. Focus now on stocks & as you get older, begin to add in bonds. Eg for now - 90% weighting of Vanguard Total Stock Market & 10% weighting of Vanguard International Growth would be a reasonable way to go.

For more info, check out The Motley Fool website.

Good luck!...Show more

Don't wait, start now (even if you are 21 years old). How much would be enough really depends on what kind of life style you want after you retired. But do start to save NOW. Find a high interest rate savings account at a bank now, than when you have enough minimum balance requirement (every bank varies, but some only require $1,000 to open one) to meet the Certification Deposit account open one. Because CD accounts pay much higher interest rates than savings. But if you are already work full time with 401K retirement plan, definitely try to max out. That means to contribute as much as they allow you too. Most company also will match your contributions up to 50%. For example, if you put (contribute) $100 to own 401K account, the company match from 2% to 50% (depends on the company's set percentage). If your company match 2%, they put $2 to your 401Kaccount, if they match up to 50%, they will put $50 dollars to your 401K account. If your campany don't match anything at all (yes, there are companies out there don't match any 401K contribution), you SHOULD still open one, because the money you put in your 401K account is pretax, which will also help lower your tax bracket. Bottom line is, you pay less income tax....Show more

The economy goes through cycles and should not be considered in saving for retirement at your age.

You should save at least the 6% your work matches in the 401K. If you don't you are throwing away free money. It is recommended 10% to 15% to have the money you'll need when you retire.

Once enrolled use your companies planners and estimators to guide your money. Keep an eye on the market and follow business reports and you can moderate losses and gains in the plan.

Because your company is matching 50% you need to lose almost 25% in the plan before you lose any of your money.

Most plans also let you use up to 50% of the money to buy a home and some plans let you borrow up to 50% for anything, paid back with interest to yourself. The money is always available in an emergency but tax penalties occur....Show more

Start as soon as you can, Get as much match from you employer as you can. After that put money into a ROTH IRA. Now is a great time to put lots of money in, you are buying low. Stick with diversified mutual funds until you learn how to invest on your own.

Remember that when you put money into the 401k or ROTH that you are putting cash into a piggy bank. You are buying shares (a product), the value of those shares fluctuates with the markets but you still keep the same number of shares. You really only lose if you sell the shares when the value is lower than what you paid for them. So invest the money with a longterm mindset, ups and downs occur in cycles every few years but you have 30 to 40 years for the value to increase. After that amount of time you should be ahead even in a down cycle....Show more

The best way to assure a comfortable retirement is to start saving 7% for retirement every year beginning in your 20's.

However, this assumes that you are also saving at least 3% every year for emergencies and contingencies (when life does not go as planned).

If you are not doing the 3% already, you should start with that and add the retirement savings 4% for now and increase it 1% each time you get a raise or bonus.

Put the retirement money in the 401k up to the limit each year add to IRA's once you hit the limit. (most people can put $15,000 per year into a 401k plan).

Put the emergency savings money in a money market account like INGDirect.com (up to one months pay) and US Savings I-bonds ($5,000 limit per year)....Show more