Since Social Security may not provide enough income during your retirement years and inflation could reduce your savings, it is important to develop a sound retirement plan. Saving through an employer-sponsored retirement plan is your first important step in retirement saving.

Your retirement can be whatever you would like it to be, especially if you take advantage of your working years to create the income you will need during retirement. Saving through an employer-sponsored retirement plan is a sound idea and can provide you with powerful savings incentives and make it easy for you to save.

The amount you put into your retirement account is deducted from your paycheck before it is federally taxed. In other words, it costs you less than a dollar now to put away a dollar for your future. The example provided shows how tax incentives can work.

In addition to the advantages of saving in your retirement plan, you can enjoy another tax benefit as you continue to save: You'll pay no current taxes on your earnings. This compounding advantage allows your retirement plan savings to potentially grow more quickly over time than your savings in an ordinary, taxed savings account. Of course, at retirement the withdrawals you make from your retirement account will be considered income and can be subject to regular income taxes, depending on your tax bracket at that time. You may be in a lower tax bracket during retirement and your tax burden may be less than it is today. Please be aware that if you make withdrawals before age 59 ½, significant tax penalties may be applied.