Your first step is to take advantage of tax-favored retirement savings tools. If you have access to a 401(k) or other employer-sponsored plan at work, participate and take full advantage of the opportunity. Open an IRA account and contribute as much as you can. Ideally, you'd be able to invest in both an employer plan and an IRA. Contributions to most employer plans are made on a pretax basis, while IRAs may allow for either tax-deductible contributions or tax-free withdrawals, depending on the type of IRA you choose. Plus, funds held in an employer plan or IRA grow tax deferred. These tax features may enable you to accumulate a sizable retirement fund, depending on how well the underlying investments perform.

With that in mind, you should aim for long-term investment returns and steady growth. Many financial professionals suggest a balanced portfolio of stocks, bonds, mutual funds, and cash equivalents. The percentage of each will depend on your risk tolerance, your age, your liquidity needs, and other factors. However, the notion is fading that you should change your investment allocations and convert your entire portfolio to fixed income securities, such as bonds or CDs, by the time you retire. Instead, many professionals now advise that you continue investing for long-term growth even after you retire--especially since people are retiring younger and living longer on average. Your own personal circumstances will dictate the right mix of investments for you, and a qualified financial professional can help you make the right choices.