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With decades to go before retirement, you might imagine that today’s youngest workers — those in their early 20s and 30s — would have a leg up in terms of planning and saving for their future. Not necessarily.

A recent study by global human resource consulting firm Aon Hewitt found that eight in 10 Gen Y workers are at risk of not meeting all their financial needs in retirement.1 The reason? They’re simply not saving enough.

In fact, only half of today’s younger workers who are eligible to participate in a retirement plan at work actually do so. And among those who participate, 41 percent aren’t saving enough to receive the entire employer-provided match.2 Yet, your company retirement plan may be one of the most important tools you have to build the kind of lifestyle you want for the future. That’s because it offers significant tax advantages that can jump-start your retirement savings and keep them growing until you reach your long-term financial goals.

• Yousaveontaxestoday.When you participate in your retirement plan at work, the money you contribute is deducted from your pay before federal (and, perhaps, state and local) income taxes are taken out. This reduces the amount of income that gets reported to the IRS for tax purposes.

Let’s say, for example, that your marginal income tax rate is 15 percent and you make $1,200 of pre-tax contributions to your retirement plan this year ($100 per month). In this hypothetical situation, those contributions will help reduce your 2010 federal income taxes by $180($1,200 x 15%). To learn more about the effect of pre-tax savings on your take-home pay, go to miretirement.com. There, you’ll find a Salary Deferral Take Home Pay Calculator.

•Yousaveontaxesovertime.All of the money in your plan account — your contributions and their investment earnings — will accumulate free from taxes until you start making withdrawals. The ability to grow your savings on a tax-deferred basis can make a big difference in your account value over time. To see how much, consider the example on the next page.

• Grabextracreditforsaving.Depending on your earnings, if you participate in your retirement plan at work, you may also be eligible to claim an income tax credit through the so-called “saver’s credit.” This potentially valuable credit of up to $1,000 (also known as the Retirement Savings Contribution Credit) is available to anyone with a filing status and income of:

º Married, filing jointly, with adjusted gross income (AGI) up to $55,500 in 2010 ($56,500 for 2011)

º Head of household, with AGI up to $41,625 in 2010 ($42,375 for 2011)

º All others, with AGI up to $27,750 in 2010 ($28,250 for 2011)

• ThinkaboutRoth.If your plan allows you to make after-tax Roth contributions, you might want to consider taking advantage. While your contributions will be made with after-tax dollars (rather than with pre-tax dollars),

Tax Tip #1: Tune In to

You’rePartneringWithaWinner!M&I was recently ranked the #1 Retirement Plan Provider for the fourth year in a row!

We are proud to share the results of an independent survey that was conducted with over 40 of the country’s leading retirement plan providers. Each year, PLANSPONSOR® magazine conducts a survey directly with clients asking them to rank their retirement plan provider in 23 different service categories, from educational programs, online tools/services, and enrollment assistance, to knowledge and expertise, and statement accuracy.

Once again, M&I received the most Best in Class awards given to those providers ranking in the top quartile. For the fourth year in a row, M&I exceeded all competition, winning 70 awards; 25 more than the next competitor.

We are proud to be recognized by our clients in this way and remain committed to bringing you best in class service in all we do.

To find out more about the survey, visit miretirement.com.

Tax Savings

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

2% 4%Contribution (% of salary)

6% 8%

Account Value

This example assumes an annual salary of $30,000, a 6 percent average annual return, compounded monthly, for 35 years, and reinvestment of investment earnings. This example is for illustrative purposes only and does not represent any specific investment or fund. Past performance does not guarantee future results.

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the distributions you receive in the future will be tax-free, if they meet certain requirements.

•Preserveyourtaxbenefits. If you’re changing jobs, think carefully before you cash out of your retirement plan savings. According to Hewitt research, 46 percent of employees cash out, sacrificing the tax-deferred growth of those savings.3 For example, if you have a $5,000 account balance and opt to take a check rather than rolling over your retirement distribution, you will pay full taxes on that balance, plus a 10 percent IRS early withdrawal penalty, if you are under age 59½. Yet, keeping your money invested tax-deferred may potentially turn that $5,000 into $33,272 at retirement, assuming your money earns a 6 percent average annual return and compounds monthly, for 35 years.

The best way to make the most of your retirement plan at work is to contribute regularly and to set aside as much money as you possibly can. If you have a plan with an employer match, consider contributing enough to take full advantage of it, if possible. The match is “free money” that will also grow and compound tax deferred until you withdraw it at retirement. ■

Example:How Tax-Deferred Compounding Multiplies Your SavingsWhen you participate in your retirement plan at work, your contributions and their earnings accumulate free from federal income tax until withdrawn. This can make a dramatic difference in the way your savings grow over time. Naturally, the more you save, the larger the difference.

To see how much, consider this example. Let’s say you contribute 4 percent of your $30,000 annual salary ($100 a month) to your plan. After 35 years, your account would total $143,183, assuming a 6 percent average annual return. Increase your savings rate to 6 percent ($150 per month) and your account would total $214,775 after 35 years. As you can see, boosting your savings rate even by a small amount can make a big difference over time.

1 “Gen Y Workers May Be at Most Risk in Terms of Retirement Security, World at Work,” December 10, 2010,http://www.worldatwork.org/waw/adimComment?id=45961.

2 Mont, Joe, “Generation Y Savings Woes Echo Their Elders,” Newsweek Education, December 14, 2010,http://education.newsweek.com/2010/12/14/generation-y-savings-woes-echo-their-elders.print.html.

3 “Hewitt Study Shows Nearly Half of U.S. Employees Cash Out Their 401(k) Accounts When Leaving Their Jobs,”Aon Hewitt, October 28, 2009, http://www.hewittassociates.com/Intl/NA/enUS/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=7498.

Given the opportunities life presents, we do our best to prepare for events that are likely to occur at every stage of our life — like planning our finances, saving for retirement and paying our taxes. And as sure as winter turns to spring, tax season is a perennial occurrence.

This special Tax Issue of Educated Investor brings you many ideas to help you reduce taxes and boost your financial security for the future, including making the most of your employer-sponsored retirement plan.

In fact, a new tax law, The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, brings good news: it reduces payroll taxes by two percentage points, adding as much as $2,136 to your take-home pay in 2011. Now may be the time to put these tax savings to work. Consider contributing 2 percent more to your retirement fund and help secure your financial future.

Every stage of life gives you the opportunity to start planning and saving for retirement. One significant action you’ve already taken toward building the retirement you want, is participating in your employer-sponsored retirement plan. Whether you are just starting out, or nearing retirement, your employer’s plan helps you save for a better future.

Wherever you are, wherever you are going, your retirement plan will help you get there.

Tax Tips for All Seasons

Wherever you are Wherever you are going

Online Extra

Organize Your Taxes: Organize YourLifeWhat’s the secret to approaching tax time feeling cool and calm? Get organized! Read this issue’s Online Extra article, “Organize Your Taxes: Organize Your Life,” and find out how to avoid the stress of filing your taxes — and get a better handle on meeting your savings goals at the same time. It’s available exclusively on miretirement.com.