Explore Your 401k

• If you work for a private employer, your 401k may be your best tool for building long-term wealth for retirement. That is because a 401k plan combines a high contribution limit with significant tax savings. As of 2011, you can contribute a full $16,500 to your 401k, plus another $5,500 if you are 50 or older. That means you can potentially shelter up to $22,000 of your yearly income from taxes while building your nest egg for retirement.
  
  

Tax Savings

• One of the most important things to know about saving for retirement is that it can yield both immediate and long-term benefits. You already know that saving for retirement is important to building your long-term wealth, but the immediate tax savings can be just as important. Every dollar you save in taxes today is another dollar that can grow and compound for decades to come. That compounding can greatly increase the value of those immediate tax savings and allow your nest egg to grow that much faster.
  
  

IRA Options

• An individual retirement arrangement, or IRA, is one of the best tools workers have to save and invest for retirement. You have two different types of IRA accounts to choose from, a traditional IRA and a Roth IRA. With a traditional IRA you can get an immediate tax deduction for your contribution, but you will have to pay taxes when you withdraw the money in retirement. If you choose a Roth IRA instead you give up that immediate tax break, but there will be no taxes due on the money when you withdraw it in retirement. No matter which IRA you choose, you can contribute up to $5,000, as of 2011, plus an extra $1,000 if you are at least 50 years of age.
  
  

Balancing Your Portfolio

• How you invest can be just as important as how much you invest, and it is important to build your investments based on your age, your proximity to retirement and your own tolerance for risk. If you are a nervous investor prone to sell when the market goes down, it might be wise to limit your exposure to the stock market, at least until you get used to the ups and downs of the indexes. If you are more bold when it comes to investing with decades to go before retirement, you might be comfortable keeping most, if not all, of your portfolio in stocks and stock mutual funds. But as retirement gets closer, it can make sense to pull some of that money off the table and put it in fixed-income investments like money market funds and certificates of deposit.