Individual retirement accounts were created to offer tax benefits to those who wished to save money for their retirement. A 401(k) plan is a specific IRA that businesses can make available to their employees. Participants in a 401(k) designate a portion of each paycheck to be added to the company retirement plan.

Some employers will contribute an amount to employees’ company-sponsored retirement accounts, according to each employee’s contribution rate, as an incentive to them to save a greater percentage of their income in the company’s 410(k).

It requires a great deal of discipline to save a portion of your income in an IRA-whether through a 401(k) or another IRA-especially when there are the seemingly endless expenses associated with raising a family. What works for one IRA-builder may not work for another. It depends on the saver’s lifestyle. For instance:

-Is it a one-income or two-income family?

-Does each spouse have a 401(k)?

-How does the saver distinguish between wants and needs?

-What value does the saver place on material possessions: cars, homes, country club memberships, boats, expensive vacations, electronic toys?

-Will college-bound children attend state or private schools?

The second “d” word is denial. Your ability to balance immediate gratification with long-term benefit is key to saving success. One must deliberate long and hard before major expenditures and ask oneself: How much do we need another Mediterranean cruise this winter, an SUV with all-wheel drive, an admittedly too-high mortgage, new cars for the family’s teen drivers, monthly $50 haircuts? After contemplation, the saver may well decide to proceed with an indulgence or two. It’s an entirely personal choice.

As an IRA builder, you must determine how much too sock away each month and never touch it (early withdrawals are penalized and taxed according to the individual’s current income tax bracket). Experts recommend saving at least 10 percent of one’s income every month, because of the rate at which the funds compound, especially with an employer match. Sticking to this commitment requires another “d” word: the ability to dream, to “keep your eye on the prize.”

Staying focused on the end game is difficult for most, especially because the frequency at which reasons to spend money appear, sometimes out of nowhere. Hang up photos of Caribbean islands, ski slopes, sunny beaches, a sailboat, humanitarian projects, a summer cottage, the Sistine Chapel, ocean liners, special volunteer opportunities-anything that helps keep the dream alive. Talk to retired friends and relatives about their financial situation-where they are and how they got there. For 35 or 40-year-olds, 62 or 65 seems a long ways off. But ask them how well they remember their 20s, then watch as they perk up and smile. That’s how far away retirement is.

Saving respectable amounts of money doesn’t have to be painful. Here are a few ways for a 40-year-old saver to do it without feeling a thing:

-Switching from mocha lattes to regular coffee from the specialty coffee shop 250 times (average number of work days in a year) will save you about $300 a year.

-Eating out one less time every month, for a family of four, about $600 a year.

-Choosing an online movie rental plan or premium cable movie channels instead of paying for both can save from $120 to $480 each year.

-Wearing your $200 winter coat for three years instead of two, about $600 over 20 years.

-Traveling by car (for a family of four) to a location 200 miles from home instead of flying to a family vacation destination can save more than $800 each time.

-Taking, rather than buying, your lunch twice a week for 50 weeks, $750-year.

-Stopping one magazine subscription, about $200 a year.

-Reducing the nightly glass of wine (for one person) to two fewer each week, about $250 a year.

Of course, these calculations are rough, but they are reasonable, if not understated. Taking advantage of each of these opportunities amounts to more than $2,500 yearly. If your spouse can make similar cuts, your IRA could be up to $5,000 richer every year. And if your money is in a 401(k) with an employer match, much more than that. Over a minimal 20 years, that adds up to a tidy sum-the dream realized, the prize you’ve been eyeing. Now’s the time for a little immediate gratification. You deserve it.

Author Bio: James Vignione, administrator of Orion Systems specializes in free personal finance software , financial calculators, and financial information to help people manage and organize their finances more efficiently. For more information, visit http://PersonalFinanceSoftware.com

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