In Your Twenties

At this age $12,000 might as well be a billion dollars, but start with modest contributions. If your employer offers one, put 5% to 10% of your salary into a 401(k) or 403(b) (the same kind of plan, but offered by nonprofit organizations) through automatic payroll deductions. You get two benefits: First, it's taken out before taxes, and second, you don't miss the money!

Invest that money in dividend-paying stocks and some selected growth stocks. As a general guideline only, we'll say keep at least 50% in fixed-income investments. You've heard that you can afford to take risks when you're young, right? We don't believe in taking big risks with your retirement savings! Don't put too much in your company's stock for that same reason.

If you're self-employed, start exercising just a little discipline and put 5% to 10% of what you earn each year into a SEP IRA or a Keogh Plan.

In Your Thirties and Forties

You are reaching your peak earning years, but if you have children, savings and investments become even more important now. Ideally, around 15% of your gross income should go into a retirement account. (Start with 10% if 15% is too much of a strain!). Same as in your twenties: We recommend at least 50% in fixed-income investments, including tax-free municipal bonds. They make more sense from a tax standpoint.

If you need some money to go toward your children's education, invest less in your retirement plan, but be sure to put money aside each year. And if you have debts, start paying them off now!

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