This year (2007) you can contribute up to $15,500 to your employers' 401(k) plan. If you are older than 50 add an extra $5,000 in catch-up contributions for a total of $20,500. If you are eligible to participate and your employer offers matching contributions there is no reason for you to say "no" to this free money. This is probably one of the best ways to achieve your desired retirement income.

Benefits of 401(k) participation:

It's easy & helps lower your taxes

You decide how much you want so save. Your contributions are automatically deducted from your paycheck before federal and state income taxes are calculated. This reduces your taxable income by the amount of your contribution and saves you tax dollars.

Your money grows faster

Your contributions and company match may grow further through investments in stocks, mutual funds, and money market funds. The important point is that this is tax-deferred growth. Taxes are paid when you withdraw the money at retirement; usually at a much lower tax rate.

Rollover option

When you change jobs you have an option to rollover your vested 401(k) balance into an IRA or a new 401(k) plan. Do [b]not[/b] cash it out or take possession of that money. Instead, use a direct rollover and your current company will send your check to the new IRA or 401(k) trustee.

Flexibility

Most 401(k) plans have hardship withdrawals and a first time home buyer provision. Visit your employer's human resources department and learn everything you can about 401(k) plan offered. Your financial advisors should be willing to give you advice as well. Start as early as your can. Time (number of years investing), compounding interest, and persistency all work in your favor.