Albert Einstein said: "I never think about the future. It comes soon enough." Clever, sure, but Einstein wasn't planning for retirement.

The fact that retirement looms is the reason to get thinking. Yet if you don't have a plan, you're not alone. According to a MetLife Survey, 66% of baby boomers worry about retirement security, and according to the SEC, two-thirds of Americans don't believe they know enough to make their own financial decisions.

But here's the thing: You can make your own financial decisions. And it's never too late to begin.

Get organized
There are three keys to getting started:

  1. Pay off high-interest consumer debt.
  2. Live below your means.
  3. Be smart with your money.

The key, of course, is the third step: Be smart with your money. What does it mean? It means regularly saving and investing, allocating assets efficiently, and avoiding fees and taxes. There's no way to build your own financial empire if all of your funds are helping build someone else's.

Get going
Don't have an individual retirement account (IRA)? That's fine -- but start one today. An IRA is the best way to make tax-deductible contributions toward retirement. It's also the best way to enjoy the gains tax-deferred. In other words, you can pay for the future without paying Uncle Sam.

Let's say you haven't saved a lick yet, but decide to open an IRA now. To max out in 2007, you only need to contribute $333.33 per month. That might be difficult, but you can do it by saving more than you spend. After 2008, you can max out by contributing $416.67 per month. That's not much more, but it can make a world of difference.

If you start this plan today, you could have a tax-deferred nest egg of more than $80,000 by 2016. Not great, but not bad, either. And if you have 10 more years until retirement and let that money continue to compound annually (without any additional contributions), you could have more than $200,000. If you continue to make those $416.67 monthly contributions, 20 years of savings and investing will give you the tidy sum of $300,000. Now we're talking!

Get smart
These calculations are based on earning the market's historical 10% annual return. You can do that by investing in a low-cost index fund. But beware: Not all index funds are equal.

Fund

Index

Expense Ratio

SPDRs (AMEX:SPY)

S&P 500

0.10%

Fidelity Spartan 500 (FUND:FSMKX)

S&P 500

0.10%

Vanguard 500 (FUND:VFINX)

S&P 500

0.18%

Morgan Stanley S&P 500

S&P 500

0.64%

Morgan Stanley's S&P 500 index tracker is roughly six times as expensive as peers that hold the same basket of stocks! The top holdings of these funds are generally blue chips such as Altria (NYSE:MO), Bank of America (NYSE:BAC), and Pfizer (NYSE:PFE).

If you inadvertently hold the wrong index fund for 20 years, you could be out some $20,000 in the scenario I mentioned above. That's a costly mistake that you'll do well to avoid.

Do better
You can hope to do even better than the market's historical return if you allocate your assets intelligently and make some smart stock picks along the way. That's exactly what Fool retirement guru Robert Brokamp aims to help Motley Fool Rule Your Retirement subscribers do. Recent issues include interviews and columns from expert stock pickers, retirement success stories, and strategies for fending off the taxman.

Click here to take a free one-month trial and get on track for a successful and secure retirement by 2016.

This article was originally published Jan. 4, 2006. It has been updated.

Tim Hanson does not own shares of any company mentioned. Bank of America is a Motley Fool Income Investor recommendation. Pfizer is a Motley Fool Inside Value recommendation. No Fool is too cool for disclosure.