3 easy ways to start saving now

Saving for retirement is not easy, especially for young people. But these simple steps can get you started.

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By Walter Updegrave, Money Magazine senior editor

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Walter Updegrave is a senior editor with Money Magazine and is the author of "How to Retire Rich in a Totally Changed World: Why You're Not in Kansas Anymore" (Three Rivers Press 2005)

NEW YORK (Money) -- Question: I'm 22 and want to get an early start on saving and investing for retirement, but I don't know where to begin. How do I start a retirement plan? --Jacklyne S., Kileen, Texas

Answer: It's great to hear from someone so young yet so keen to start planning for retirement. Such initiative at a tender age isn't the norm. A November report from the Employee Benefit Research Institute shows that fewer than 30% of workers between the ages of 21 and 24 whose employer sponsors a retirement plan participate in it. That's less than half the percentage of workers in their mid-40s and older.

But when you think about it, this reluctance to get a head start on retirement planning isn't exactly surprising. After all, the younger you are, the more retirement seems like a hazy mirage in the far-off future. So it's understandable that short-term wants and needs often trump long-term considerations.

Indeed, when Fidelity Investments recently surveyed more than 1,000 Generation Y workers -- i.e., those between 22 and 33 years of age -- it found that nearly half who had a 401(k) or similar plan considered managing their everyday finances a more crucial obligation than saving for retirement.

Which brings us to the crux of the issue:

Given all the pressing matters competing for your attention and dollars, how does someone just starting out in her career -- or for that matter someone of any age -- go from wanting to prepare for retirement to actually doing it?

I have three suggestions:

1. Take the saving decision out of your hands. People don't fail to plan for retirement because they don't believe it's important. It's because saving doesn't come naturally to most of us. Part of our brain is hard-wired for immediate gratification. And even if you possess the willpower to forego pleasure today for a payoff tomorrow, exercising it on a consistent basis can be a tough considering that affording even the necessities can be a challenge these days.

That's why the most effective way to save for retirement is to put your savings on autopilot. If you've got a 401(k) or similar plan at work, enroll in it so that money flows automatically from your paycheck into your retirement savings account before you even get a chance to spend it. If your employer doesn't offer such a plan, then open a traditional or Roth IRA through an automatic investment plan that transfers cash from your checking account into a fund each month. (Morningstar's IRA calculator can tell you how much you can contribute.)

Many fund companies allow you to start such a plan with a few hundred bucks or less. To find the minimum for a specific fund, plug the fund's name or ticker symbol into the "Get Quote" box that appears at the top of every CNNMoney.com page and select "Fees & Management" from the Fund Snapshot.

2. Don't get bogged down by details. Despite good intentions, some people never get around to starting a retirement plan because the whole process just seems too complicated. Deciding how much money to put away, which investments to choose, how much to invest in each one...The number of choices can feel overwhelming and lead to paralysis.

I'll let you in on a little secret, though: Every decision you make doesn't have to be perfect. The most important thing is to get the process going. If you sign up for your 401(k), contribute at least enough to get the full employer match. Can't manage that? Then start with a percentage of salary you can handle, even if it's just 5% or less. If you go the IRA route, pick a monthly contribution you know you'll be able to sustain.

As for investing, keep it simple there too. If you're uneasy about choosing investments, go with a target-date retirement fund. If that's not an option, go with a balanced fund or split your contribution between a total stock market index fund and a total bond market index fund or between a large-cap stock fund and a diversified bond fund. Or for that matter, just stick the money in a money-market fund until you find a better place.

3. Keep the momentum going. Good investing can help build your nest egg, but the surest path to a secure retirement is regular saving. So as you progress in your career and earn more money, try to ratchet up your savings effort as well.

You'll increase your odds of maintaining your savings regimen if you avoid taking on unnecessary debt. Remember that study I mentioned earlier? Well it also found that Gen Yers hold more than three credit cards on average and 20% of them carry a balance of more than $10,000.

Hey, I know credit cards are convenient. But if easy borrowing is getting in the way of saving for retirement, then maybe you need to kick the plastic habit and operate on a cash basis.

Once you've got your retirement plan underway, you can always change or refine your choices later. You can re-assess how much to save, revise your investments and monitor your progress by checking out online resources like our Ultimate Guide to Retirement and our Retirement Planner.

But if you never take the first step, you won't have anything to change or refine. Except perhaps your retirement plans, which you'll have to downsize. To top of page

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