This is a question that usually bugs younger people when they start their first “real” job. Most larger companies offer some kind of 401k plan, and other smaller companies will help you open an IRA. The attraction to contributing to a 401k is that some companies will match your contribution up to a certain amount. It truly is one of the only times in your life where a company will give you FREE money. The only catch is that sometimes they make you stay with that company for certain amount of time before the money is fully vested. This means that you will have to work at the company for so many years before you can keep all of the matched money. The other side to this question is that most young people could use as much of their paycheck as they can get. We do not have a lot of room to be thinking about 40 years down the road. I do not have a great answer to this question, because I believe it depends on your situation.
Consider this: if you started contributing to $100 a month to your retirement account at the age of 25, and you were going to retire at the age of 60, then your account would reach $379,000. If you started saving for retirement at the age of 35 with the same contribution, then you would have just $132,000. The point is obvious. If you start saving NOW, compound interest becomes your best friend when it comes to investing money. This is not even factoring in the match contribution that a company may make.
However, you may be a in situation where a $100 more per month would help you get out of debt faster or save up for a bigger purchase down the road. This might make more sense if you are debating whether or not to contribute to your retirement account. My take on this dilemma is that I think one should do whatever he or she needs to do put themselves in a sitaution to contribute large chunks of cash to their retirement account down the road. If NOT contributing now will set you up to contribute $500 – $1000 a month to retirement, then wait to invest. If there is nothing stopping you from investing now and your company will do a 401k match, then NEVER pass up the free money.
Remember: Always contribute to a 401k with a company match first, then use a Roth IRA as a secondary account. If you are self-employed, do the SEP IRA. If your company does not match your contributions, then go with the ROTH IRA.