Retirement can be a scary word if you do not have any financial planning in place. Planning for retirement should not be an afterthought or you will find yourself quoting that all too familiar “hindsight” saying. So when should you start? The earlier the better of course. Ideally, you would start saving in your 20s, when you first leave school and begin earning paychecks. That is because the sooner you begin saving, the more time your money has to grow.

Each year’s gains can generate their own gains the next year by compounding. For example: Let’s say you put off saving until you turn 35, and then save $3,000 a year for 30 years. By the time you reach 65, you will have set aside $90,000 of your own money, but it will have grown to only $367,000, assuming the same 8% annual return. That is a huge difference.

So, how much will you need? Recent research suggests that most people do not know how much they need to save for retirement. The Employee Benefit Research Institute’s 2007 Retirement Confidence Study found that only 43% of workers have actually tried to calculate how much they need to save for a secure retirement. It is important to make realistic estimates about what kind of expenses you will have.

Be honest about how you want to live in retirement and how much it will cost. Include any long-term debt into the equation. These estimates are important in figuring out how much you need to save in order to comfortably afford your retirement. As a general rule, you’ll need at least $15 to $20 in savings to cover each dollar of the annual shortfall between your income and your expenses. For example, if your projected retirement expenses exceed Social Security and pensions by $20,000 a year, you might need a nest egg of $300,000 to $400,000 to bridge the gap.

Where to start saving? The first and best saving-for-retirement tool is an employer sponsored 401(k). If your employer offers one you should take full advantage of it. Some employers also offer matching funds on your employer-sponsored plan. The money is usually taken right out of your paycheck, before taxes and you don’t even feel it! Like a 401(k), IRAs offer huge tax breaks. There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals, and, if you qualify, your contributions may be deductible; a Roth IRA, by contrast, does not allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals. Other savings tools include annuities, stock investments, pensions and several self-employment plans for those who work for themselves.

Having a “diversified portfolio” is also important. Basically, it means don’t put all your eggs into one basket! How you divide your portfolio will have a big impact on your long-term returns. Stocks have the best chance of achieving high returns over long periods. A healthy dose will help ensure that your savings grows faster than inflation, increasing the purchasing power of your nest egg. Many retirees stash most of their portfolio in bonds for the income. Unfortunately, over 10 to 15 years, inflation easily can erode the purchasing power of bonds’ interest payments.

Money-market funds – are the least risky investment of all. However, they also have the lowest returns. This may be a good portfolio choice if you might not need cash in your retirement account at all until you are approaching retirement age or in retirement.

Mutual funds are yet another great portfolio diversifier because you get instant diversification. Many people do not have enough money to buy a portfolio of stocks and bonds that is varied enough. Pooling your money with thousands of other investors solves that problem, ideally spreading your money across enough investments to reduce the risk of you being wiped out by any single bad bet.

There are many places to get help with your retirement planning. If you are a do-it-yourself kind of person, or you’re just looking for some basic guidance, you can check out online resources like the AARP financial planning website to learn the basics (you’re off to a good start!), and enter some of your numbers into some online calculators to see where you stand. If you have a retirement plan through your employer, they might offer some free seminars or classes on retirement planning of which you should take advantage.

If you feel you really need some one-on-one help, or you have substantial assets that you feel require professional management, you might want to consider hiring a financial planner. The most important thing to remember is that you need to save as much as possible for your retirement – and you should start as soon as possible. Do not let fear or indecision stop you. Use the resources available to you, save early and save often!