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Bigger bang for your retirement buck

(Click for video linked to a searchable transcript of this Mad Money segment)

If you're a young person just entering the workforce, how can you get the best return on your retirement money?

That question recently came across Jim Cramer's desk.

"It was essentially a question about how to get started, and I think it's a very good one," Cramer noted.

Largely the "Mad Money" host believes individual investors can beat their professional counterparts by holding 5-10 stocks and actively managing the holdings through regular research; something he calls homework.

Gregor Schuster | Photographer's Choice RF | Getty Images

"If you do the homework, keeping track of everything you own, then you should be able to beat the performance of the S&P 500 pretty regularly," Cramer insisted.

And if you're a young person, Cramer thinks a Roth IRA is preferable over a standard IRA.

Although you fund a Roth with after tax dollars, "you're then allowed to withdraw the money you invested without paying penalties at any time, so you have more access to your cash than in a traditional IRA," Cramer said.

It's particularly valuable, "if you think you might need to withdraw a decent chunk of change before you turn 59 and-a-half, the age where you can start withdrawing money from a normal IRA penalty-free."

All told, holding 5-10 stocks in an IRA is, "In my opinion, this is the most efficient, most effective way to generate money for retirement," Cramer said.

However, there is a caveat. You've got to do the homework. That involves reading quarterly reports, monitoring Street research and following the news.

If you're the type of person who doesn't have the time or the inclination to actively manage your money, then this strategy won't work.

"I recognize that this strategy isn't for everyone," Cramer added.

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If you fall into this category Cramer thinks the best course of action is to own an index fund with low fees that tracks the S&P 500.

However, Cramer doesn't want the idea of managing your own money to scare you off. "If you have the interest and you do the work, you should be able to beat the performance of the S&P 500 pretty regularly."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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