Here's what you need to know:
The most common types of retirement accounts you'll hear about are 401(k)s and IRAs. A 401(k) is a tax-deferred, employer-sponsored account, meaning you will pay taxes on the money only when you withdraw it and the employer chooses where the money is invested. You can contribute up to $18,000 a year to your 401(k). Keep in mind that though you may not see them, you do pay fees for your 401(k).
IRAs are also tax-deferred but are not offered through your employer, and you can control where your investments are made. You can contribute up to $5,500 a year to your IRAs.
"You're recreating a salary in the future when you likely can't produce one," said Tim Maurer, a certified financial planner and director of personal finance for Buckingham and The BAM Alliance. "It provides a certain level of freedom."
It's important not to forget about these accounts when you switch employers; avoid simply cashing them out. Cashing out tax-deferred accounts may trigger a 10 percent penalty if you're under the age of 59½. At 70½ you're actually mandated to withdraw a required minimum distribution, or RMD, annually.
Instead of cashing out, you can roll over the 401(k) plan from your previous employer into one from your new employer or into a traditional IRA.
The paperwork for doing this will be provided by your previous employer when you leave. If you've lost the paperwork or never received it, simply reach out to the HR department for a copy, Maurer explained.
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"Even if you only worked there for two years, there could be $1,000 in that 401(k)," said Carolyn McClanahan, a CFP and founder and director of financial planning at Life Planning Partners. "It is a lot of effort and paperwork to roll over a 401(k), but keep it simple and clean — when you roll it over, it's more organized and easier to pay attention to and make sure stuff is invested correctly."
Some employers match their employees' contributions up to a certain percentage. This contribution does not count toward the $18,000 annual limit previously mentioned.
"In general, I like to keep things simple when you're just starting out in the workforce," McClanahan said. "The first thing you want to do is make sure you're saving to your employer's 401(k) plan, at least enough to get the match — and once you've at least gotten the match, then you can save even more — and try to save at least some money in a Roth account."
A Roth IRA, unlike the 401(k) and traditional IRAs, is not tax-deferred; you pay taxes on the money in the year you make the deposit. This account is advantageous for young people who expect to be in a higher tax bracket when they are older.
Your eligibility for a Roth IRA depends on your income and whether you are married or single.
If you are single and make less than $118, 000 a year, then you can contribute up to $5,500 to a Roth IRA.
If you are ineligible but would still like to take advantage of the benefits of a Roth IRA, consider getting a 'backdoor' Roth IRA, which allows you to convert your traditional IRA to a Roth IRA.