Personal Finance

Retirement strategies based on birthday? Start savings now

Reasons to pick a Roth 401k

Despite warnings to the contrary, many Americans aren't saving for retirement. About half of households age 55 and older have no retirement savings, according to a May report by the Government Accountability office.

But for employees being blasted with open enrollment information this October, it's never too soon to start. When it comes to retirement, it's all about the time value of money, Matt Sommer of Janus Capital Group told CNBC's "Power Lunch" Tuesday.

Depending on your age, you may want to pick different options when starting a retirement fund, Sommer said. In your 20s, for instance, you have the power of compounding on your side, and you can put away just a third of someone who starts in their 30s or later, Sommer said.

For instance, a 25-year-old medium earner aiming to retire at 62 would have to save 15 percent of their yearly income at a rate of 4 percent return. Starting at age 35, the rate jumps to 24 percent, according to a 2014 study by the Center for Retirement Research at Boston College.

But you can still take advantage of the perks of saving young in your 30s, as long as you "think Roth," Sommer said.

"The money's going to grow tax-free, and that's very powerful for someone with a 30-year timeframe," Sommer said of the Roth 401(k) plans now offered by many employers.

Those in their 40s can avoid pitfalls and monitor their retirement funds more closely by consolidating their previous plans into one with their current employer, or through an individual retirement account (IRA) rollover, Sommer said. These options also allow you to avoid the steep tax liabilities and penalties of cashing out old accounts, according to a recent study by Fidelity.

If you're playing catch-up in your 50s, don't forget to take advantage of catch-up provisions, which allow you to exceed the contribution limit for employer retirement plans, according to the IRS. In addition to your maximum contribution, you can squirrel away an extra $1,000 for IRAs for a total of $6,500, or an extra $6,000 for a total of $24,000 in 401(k) plans, Sommer said.