I've tried to give you an overview of the highlights of the various types of retirement accounts. Still, the thing to remember is that you can't take advantage of these accounts unless you can save money into them. This means that you'll have to learn to live on a little less money.
My tape on introductory personal finance gives some ideas on how to budget and save money, but one of the easiest ways to save is through a regular savings plan.
If you use a 401(k) or 403(b) plan you should be able to have your company divert a certain amount of each paycheck into your retirement account. The money thus grows effortlessly, and believe me, you'll be able to find a way to survive with the slight reduction in take-home pay.
You can set up an automatic savings plan for an IRA as well. Most mutual funds allow you to contribute to your IRA with automatic deductions of as little as $50 from your normal checking account.
Here's a couple more points about putting money into retirement accounts. First, note that most retirement accounts are basically trust instruments. All the assets are held in the name of one person, with designated beneficiaries. There are no jointly owned retirement accounts, and assets in the account normally are distributed according to the listed beneficiaries rather than by a will.
When some spouses hear this they get a little nervous. They're reluctant to channel all their savings into an account held by one person. They're afraid that in case of divorce, the other spouse will get all the loot in the retirement account.
This worry, however, is misguided. Retirement money earned during marriage is generally treated like other marital property. In the event of divorce, a so-called qualified domestic relations order is used to divvy up retirement plan assets.
Spouses also are protected when it comes time to withdraw or borrow money from retirement accounts. If the beneficiary plans to receive regular annuity payments for life, the spouse must receive survivor payments unless the spouse signs these rights away.
And here's a final reason to take advantage of retirement account savings. The money in your savings account affords you a good degree of protection against lawsuits and bankruptcy.
A number of courts have held that retirement account funds cannot be seized by plaintiffs in lawsuits or by your creditors. The one notable exception of course is the IRS.