Today more than $1.5 trillion is invested in 401(k) accounts — enough to buy 10 million retirement condos at Renaissance in Sun Lakes, Arizona. Named for the section of the tax code that governs it, a 401(k) is an employer-sponsored retirement savings plan that lets you stash a portion of your salary — often up to 15 percent — in a tax-deferred account. Because the money is deducted from your paycheck before taxes are taken out, you pay less to the government each year. If you annually contribute $5,000 to your 401(k) and you're in the 28 percent tax bracket, you'd save $1,400 — a pretty good deal. But 401(k)s are not just a great tax shelter; they're also an easy way to invest for retirement.

CONTRIBUTE EARLY. These days almost 70 percent of 401(k) plans at large companies let you contribute within six months of your first day. Enroll as soon as you're eligible. Not sure when you become eligible? Ask your benefits department or get a copy of the Summary Plan Description. Just make sure you haven't been automatically enrolled. Unfortunately, companies with an automatic enrollment policy also tend to manage your money less aggressively.
CONTRIBUTE THE MAXIMUM. Most companies let you contribute 6 percent of your pay to a 401(k) — some as much as 15 percent — but not more than $10,500 a year. Try to contribute at least as much as the company matches. For example, most employers kick in 50 cents for every dollar you contribute, up to 6 percent. In that case, try to put in 6 percent. Any less and you're tossing away free money. If you make more than $85,000 a year, you may find that the amount you can contribute is limited. If you still can't part with the money, put in whatever you can, even if it's 1 percent. Then increase it by at least 1 percent each time you get a pay increase.
CONTRIBUTE WISELY. Typically, you can pick from an array of investments — from conservative money-market funds to risky aggressive — growth funds. Don't sock all your earnings away in a super-safe fund. Sure, you probably won't lose a cent, but over time you may not gain much, either. That's because low-yielding investments, like bonds, may not keep ahead of inflation over the long haul. If you're young and at least 20 years from retirement, put most of your money in stocks. Historically, stocks have returned about 11 percent a year, compared with 5 percent for bonds. (Not every year is as bad as 2000, when the S&P 500 index lost almost 10 percent of its value.) As you near retirement, you can begin to shift some of your funds to less volatile investments.