QUESTION: There seems to be a lot of advice out there for people getting close to retirement or who have lots of cash to throw around. But what about those of us who are just starting out? I'm 24 and make less than $35,000 a year. I contribute 4 percent of my salary to my 401(k), which is enough to get the employer match, but what should I be doing with my other investment dollars? Should I do a Roth? Save for a house or condo? Or should I play my hunch and invest in the health-care industry? I would appreciate any advice you can give me and the rest of us Twentysomethings who aren't rich already.

- Dave, Chicago, Illinois

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First, let me say that you are a shining beacon to your Twentysomething compadres for contributing to your 401(k) account. A recent survey by Hewitt Associates found that almost 70 percent of Generation Y workers (those 18 to 25 years old) don't bother to contribute.

That's a big mistake. I'm sure some people could argue that saving for a retirement that may still be a good 40 or more years down the road isn't a pressing priority. But I disagree. Just take a look at the state of Social Security and the way company pension plans are disappearing, and it's pretty clear that you're on your own, baby, when it comes to retirement.

The sooner you begin socking away money, the more time you can enjoy the benefits of compounding, and the larger your eventual nest egg will be. So kudos to you.

Now, what else should you be doing?

I think your next goal should be to build a little emergency fund. You want about three months worth of living expenses tucked away in a secure investment, such as a money-market fund or CDs, so you wont have to dip into your 401(k) if you, say, get laid off or face unexpected expenses.

You can build this fund gradually, but start as soon as you can - contributions should be in addition to 401(k) contributions.

Now turn your attention back to retirement. If you're already putting enough into your 401(k) to get the full match, then funding a Roth IRA makes a lot of sense. Unlike with a 401(k) or regular deductible IRA, you're not getting an upfront tax break with a Roth. But you can withdraw your money tax-free later on (assuming you meet certain requirements, which are detailed here www.fairmark.com/rothira/taxfree.htm.)

The upshot is that Roths give you the biggest bang for your buck if you would be in a higher tax rate when you pull your money out.

But Roths have advantages, one of which is that they offer what I like to call "tax diversification" - a fancy way of saying that by having a Roth as well as a 401(k) and regular IRAs, your retirement savings aren't all subject to one tax rate. (See more on this concept.)

As your income grows, ideally, you would want to fund a Roth to the max and then also begin contributing more to your 401(k). Ideally, you want to get to the point where you're contributing 10 percent to 15 percent of your salary to your various retirement accounts, more if you can afford it.

You can reach this target gradually by boosting your 401(k) contribution by a percentage point or so each time you get a raise. If you're lucky enough to be in a plan that automatically raises your contribution each year, I recommend you sign up for it. Anything that makes saving easy and automatic makes it much more likely that you'll actually do it.

Now, about that house you mention. I know that everyone's ga-ga about real estate, and I'm a big advocate of home ownership myself.

But do you really need to buy a house now? I don't know about you, but many 24-year-olds tend to move a lot, whether across town to live in a hipper neighborhood or across the country to pursue an exciting career opportunity.

Given the transaction costs of buying and selling a house, it generally makes sense to buy only if you plan on staying in the house at least three to five years. Maybe you can sell after a short stay and still make money during a boom, but it increasingly looks like this boom is winding down.

All of which is to say maybe you should begin saving for the house in a few years after you've got your 401(k) and Roth going and when you have a better idea of where you are in your life and in your career.

Eventually, you hope to get to the point where you'll be able to fund your 401(k) and Roth, make mortgage payments on your house, pay your other living expenses and still have money left over.

If that turns out to be the case, try to throw at least some of that cash into investments that you hold outside your retirement accounts, in other words, a regular taxable account with a mutual fund company or brokerage firm. This will give you yet another stash that you can tap in retirement, or along the way if you need it.

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