1. Join your retirement¹ plan at work. It's the easiest way to save because money is automatically deducted² from your paycheck, he says. If your employer doesn't offer a retirement plan, if you're not eligible³ to participate in it or if you're already contributing the pre-tax maximum and can afford to save even more, then contribute to an IRA.

 

2. Start small. If you're not contributing anything to a retirement plan, start by contributing 1% of your pay. If the 1% contribution hurts, then stay at that level until it doesn't hurt anymore, he says. If it doesn't hurt, then increase your contribution by another 1%. Do that until it hurts.

 

A 1% contribution may be less painful than you think. Say you make $44,259 a year. If you're paid twice a month, that's $1,844 per paycheck. If you contribute $18.44 from it, you lower your taxes by about $5, assuming you're in the 25% tax bracket, meaning your paycheck only has to drop by $13. That's about a dollar a day.

3. Start even smaller. If even 1% sounds like too much money, make it $10 a paycheck. Then increase by $10 increments⁴ until it hurts.

 

4. Save half your next raise. If you can't contribute anything now, wait until your next pay raise. When you get it, put half your raise into the retirement plan. Your paycheck will still go up some, and your contribution will be completely painless.

 

5. Don't miss out on company incentives⁵. Most employers that offer retirement plans give incentives for you to contribute some of your pay to your plan. Many add an amount equal to 3% of your pay.

 

6. Find a new job. If your employer doesn't offer matching contributions, find a job with an employer that does. Matching contributions can really add up.

 

Consider: If you contribute $5,000 a year for 40 years, earning 6% annually⁶, you'll accumulate $773,810 for retirement. If your employer adds to your account with a 3% match, the value of your account will be $232,143 more -- giving you a total of slightly more than $1 million.

 

7. Invest with a long-term perspective. You have to create a diversified⁷ mix of mutual⁸ funds that invest in stocks, bonds, real estate, foreign securities and government securities.

 

You can keep your money entirely⁹ invested in stock funds provided you understand the risks and you plan to leave your money invested in stock funds for at least five years, preferably longer, Edelman says. These two criteria¹⁰ are crucial for your decision to leave money invested in stock funds.

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