I’ll cut straight to the chase–if you aren’t saving for retirement, you are taking money out of your future pocket and wasting it. If you’ve been following the blog, you know that I posted earlier about JJ, the 30-year-old Manhattanite who had no retirement savings. If you saw the video, you’d know that I ripped him a new one for not having anything in his retirement fund. There’s good reason behind that!

It wasn’t that he wasn’t contributing to it, though. Many of you out there have a retirement account through your employer and you contribute the maximum to your 401(k). That’s fine, but that doesn’t mean that you’ve saved for retirement! I’m contributing 3% of my total paycheck right now, but that isn’t enough. That’s less than what’s optimal for retirement. You should be saving at least 10% of your total annual income in retirement, which means that a lot of the legwork isn’t up to your employer, it’s up to you.

There are a number of options to go with, so I’ll touch on a couple briefly. The first one is getting a Roth IRA, which is a pretty smart move. You can put money into it, which also later is deductible on your taxes. The only issue there is that, like a 401(k), your contribution is maxed out per year. Again, if you’re trying to put money into your retirement account, that can be a serious hinderance. For most people, between those two retirement funds, that doesn’t cover even 5% of their total income. What should you do with the rest?

Well, at that point, you need to take a risk. You can invest in a mutual fund, an index fund, a CD, just play the stock market, or play it super safe by getting government bonds. I personally am setting up a mix so that I have some high-risk stuff I can afford to lose and some low-risk stuff so I have a backup. I think of my retirement as a pie with a number of slices in it. I can afford to lose a couple, but the majority of it will still hold up. That’s precisely why so many people were screwed during the market downturn because they had failed to diversify their retirement portfolio. It’s a classic case of too many eggs in one basket.

Do you pay your future self first? Let me know in the comments below.