Retirement planning starts when you're young

Tips and to-dos from money guru Jean Chatzky

When you're in the beginning—or even the middle—of your career, thinking about (much less planning for) retirement can be, well, squishy. Who really knows what they're going to want, much less when they're going to want it? But that doesn't mean you shouldn't be planning for, and investing for, your future. After all, you only have this much time on your side once:

□ Acknowledge competing goals:

Perhaps you want to buy a house—or put a child or three through college. You still have to start socking it away for your future. That's because you can't borrow for your retirement like you can for college. Also, matching dollars and the tax treatment of retirement contributions means you're often leaving "free" money on the table if you don't prioritize your far-off future. Two good rules of thumb to follow: Save 5% of whatever you're earning for your short-term goals (starting with your emergency cushion); and consider investing 15% (including any matching dollars from your employer) for the long-term. And if you're not meeting those thresholds today, don't panic. You can bump up your contributions by 2% a year until you get there.

□ Automate your savings:

A good way to save for any goal, including your future, is to automate contributions into an account where you're likely to keep your hands off. A workplace savings plan like a 401(k), 403(b), or 457 plan fits the bill. Your employer will enable you to make contributions by deducting the money directly from your paychecks and may match a portion of what you kick in yourself. If you withdraw any money before you hit age 59½ (with certain exceptions) you will face a 10% penalty and have to pay income taxes on the withdrawal. If you don't have an employer-sponsored plan, craft your own with regular, automatic contributions from your paycheck into an IRA, Roth, SEP-IRA, or other tax-advantaged retirement account. Be sure to research different providers of these plans to make sure you're not paying for services you don't need or want. Some firms offer accounts with no opening costs and low-cost investment options. Every dollar saved today for retirement will help you down the road.

□ Allow nudges to max out (or nudge yourself):

These days, many employers will automatically enroll you in the company retirement plan, and then increase your contribution by a percentage point or two a year until you max out. Consider allowing this to happen. (In other words, don't opt out.)

□ Figure out your investment strategy:

Review your investments once a year to make sure your asset mix (mix of stocks, bonds, and short-term investments) still lines up with your goals—the movements of the markets can throw your mix out of whack. If you'd rather not deal with this, consider a single-fund solution. There are typically two types of these funds: target date funds (based on an anticipated retirement date) and target allocation funds (based on your risk tolerance and time horizon). You can also look into whether your retirement plan has a managed account offering. Many firms offer online tools to help you determine the best course of action for your needs.

□ Benchmark your progress:

If you want to replace 45%* of your preretirement income in retirement, and retire at age 67, Fidelity's research shows you should try to hit the following marks. By age 30, save 1× your current salary. By 40, 3×. By 50, 6×. By 60, 8×. And by 67, 10×. Not there? Again, don't panic. But try to increase your retirement contributions each year to make up the difference.

□ Maximize the use of your health savings account (HSA), if you have one:

Used artfully, an HSA is not just a way to pay for your nonreimbursed medical care during your working life; it's a supplemental retirement account. Contributions can be made with pretax dollars, the money grows tax free and when you use it to pay for health care in retirement (including Medicare premiums), and you don't pay income taxes on the withdrawals. Plus, as with 401(k)s and 403(b)s, you may get "free" money from your employer just for participating.

□ Chip away at your mortgage:

A paid-down mortgage is another supplemental retirement account, whether you live in the home rent-free or downsize and use the proceeds to beef up your nest egg. Resist the urge to use your home as an ATM through the years.

□ Don't get bogged down by yesterday:

The biggest financial regret many people have is that they didn't start planning for retirement earlier. Get over it. Then get going. By doing something today, you already put yourself in a better position for tomorrow.