Contribute as much as you can to any tax-deferred retirement plan offered by your employer. A 401(k) plan, for instance, lets you contribute pre-tax dollars and exclude any investment earnings from your yearly taxable income until you withdraw your money later at retirement. As an incentive for you to save, some employers match some or all of what you contribute, which can help build up your nest egg even more. Withdrawals prior to age 59 1/2 are subject to a 10% penalty and income taxes.
Source: http://www.investorguide.com/igu-article-739-retirement-basics-retirement-planning-scared-or-prepared.html
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