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6 simple tips to grow your nest egg

You know you should be setting aside money for your later years. Here are ways to make the task less daunting.

By MSN Money Partner Jan 24, 2013 2:10PM

This post comes from Rob Berger at partner blog The Dough Roller.


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In his letter to the church in Rome, the Apostle Paul lamented that the things he wanted to do he doesn't, and the things he hates to do, he does. My mom had her interpretation of Paul's missive: The road to hell is paved with good intentions.


For my part, I've often wondered if Paul was as bad at saving for retirement as the rest of us.


Image: 401k © Tom Grill, CorbisIn my 12-month plan to revitalize your finances, I listed maxing out your retirement accounts as the goal for January. Of course, everyone knows they should max out their retirement savings, but knowing we should do something and actually doing it are two different things. I guess not much has changed in the 2,000 years since Paul wrote his famous epistle.


So, today we are going to look at six practical tips and tricks to help you do what you already know you should -- contribute the maximum amount to your 401k, IRA and other retirement accounts.


1. Start.

Starting to save for retirement is like jumping into a cold pool for a morning swim: Just do it. Once you're in, the water warms quickly. With a 401k, you can save very small amounts each month to start. Even if you can afford only $25 a month, start right now. Not tomorrow. Not next week. Today.


2. Keep it simple.

I've talked to a lot of people who are afraid of investing in the stock market, and their fear keeps them from contributing to a 401k. Don't let your fear be the cause your inaction. Every 401k plan I've ever seen offers well-diversified options, including mutual funds. Most offer funds designed to be a complete solution to retirement savings called target-date funds. You can pick a fund based on when you'll retire, and the fund mix will be more or less aggressive based on that date. It's that simple. If you have any questions, the company that manages your 401k plan can help.


3. Avoid Roth 401k's and IRAs.

Let me first say that Roth retirement accounts can be a great way to save for retirement. But if you are really stretching your money to save for retirement, they may not be the best choice. With a Roth 401k or Roth IRA, you don't get an immediate tax benefit. With a traditional 401k or deductible IRA, taxes on your contributions are deferred until you take out the money. The tax savings you'll enjoy can really help if you are on a tight budget. And you can always convert to a Roth 401k later.

4. Save 50% of raises.

Each time you get a raise, increase the amount of your retirement savings. An increase equal to 50% of your raise is a good place to start. If you are contributing to a traditional 401k, remember that you get a tax break on the contribution, so it won't hurt as much as you may think.


5. Automate.

All 401k plans that I've ever seen automatically take your contribution out of your paycheck. Not all IRA accounts, however, are automated. I've automated my investment account with Betterment, an online investment account that automatically takes $100 from my savings account every month. If you use a service that offers automated savings, soon you won't even miss the money.


6. Get help.

If your employer matches some or all of your contributions, be sure to take advantage of this help. Employer contributions, however, kick in only if you are contributing to your 401k. So don't turn this help away. It may take you some time to maximize your contributions to take full advantage of your employer's match, but use this benefit as motivation to save as much as you can.


More on The Dough Roller and MSN Money:

Feb 2, 2013 9:58AM
Agree with most except the Roth part, unless choosing that option makes you contribute less up front.

Once you pay taxes up front on the Roth, whatever ends up in it (even the interest gains) long term is yours, tax free to withdraw after 59.5. Period, done, you know what you have and the govt. no longer gets a piece of it. Because of that it has more restrictions that benefit ones not making the big salary, as most are not when you are younger. Later in the last few years of your career when at peak earnings you may make too much to contribute to a Roth, only the 401k so the option is gone.  The 401k the govt. will tax when you start making withdrawals. And, they can change those rates whenever the heck they feel like it. With the coming potential financial crisis, you don't think the govt. is going to start looking for ways to tax more of all the money that boomers are going to start pulling out of 401ks over the next few decades ?  I'm expecting a screwing coming there.

 This is my situation. Always paid myself first and contributed near the max allowed for ~34 years but only choice was the 401k. I would have take the Roth path in a heartbeat as I've only trusted the govt. to waste and tax more over my life, and coming true. Have almost a million in the 401k now, but will end up with several hundred grand less that will go to taxes, and I may wish I had for health care in my late 70s-80s.  If I would have had the Roth option and just the same investment options s my 401k, all that milion would be mine as I would have chosen to pay the devil , er, the govt, the taxes up front so I would have control during retirement. Your choice, but I say pay taxes now then be done with taxes on the Roth for ever.  

 The most important point in the article is just start - now. Start, and never stop paying your retirement fund (i.e. YOU first.  Good luck to all on your financial journey. 
Feb 2, 2013 12:36PM
Roth IRAs/401ks have 2 advantages over traditional IRAs:

1.  You are required to take out minimum distributions from traditional IRAs/401ks once you reach age 701/2. There is not such requirement for Roths.

2.  Roths are better for your heirs if they are part of your estate as they can continue to earn on a tax free basis.

I would choose a Roth over a traditional IRA especially now that it looks like taxes will go up in the future.
Feb 2, 2013 1:38PM
Great...tip 2 says go with a target date fund and then immediately following this article are suggested additional articles one of which says target date funds are terrible.
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