Have you ever really stopped to think about what you want to do after you retire? You might want to travel, pick up an old hobby, or just be able to relax and enjoy yourself after a lifetime of hard work. I, for one, plan on buying a boat and sailing to the Bahamas.

I think it is important for everyone to ponder what lifestyle they would like to live in retirement. Whether it is a beachside cottage, spoiling the grandkids, or just the freedom to wake up without an alarm clock, none of it happens without a plan. But all of that is just a pipedream if you don't have enough saved to live comfortably once the paychecks stop rolling in.

Since most companies have phased out pension plans, it is up to you to contribute to your future through your 401k. Nobody else is going to do it for you. The good news? It is a lot easier than you think.

The Company Match Is Free Money

These days, most companies contribute to an employee's 401k retirement account through a match contribution. With a company match, you make an immediate return on your contribution. This is essentially FREE money and there is no reason not to take advantage.

Here is a quick example of how powerful this is. Say your company matches 50% of your contributions up to 6% of your salary. If you earn $60,000 a year and contribute 6% ($3,600), your company adds another $1,800. That is an instant 50% return on your money before the market even does anything. You will not find that kind of guaranteed return anywhere else.

The Market Works Over Time

Some market skeptics say that "you're going to lose everything" by investing in a 401k. This simply isn't true. The truth is, if you don't save anything for retirement you won't have anything for retirement. That is the only guaranteed way to lose.

History has shown that the market is a great investment over time. Even if the market goes down in the short-term, in the long term you are going to have a return. The S&P 500 has averaged roughly 10% annually over its history. There have been crashes, recessions, and panics along the way, but the long-term trend has always been up.

The biggest risk isn't that the market goes down. The biggest risk is that you never start investing at all.

Roll Over, Don't Cash Out

If you can avoid it, it is imperative that you don't take a withdrawal from your 401k. The most common time to take a withdrawal is during a hardship or when changing jobs. I have changed jobs 4 times in the past 10 years. Upon leaving a company, I usually receive a check from my previous employer's 401k plan or a notification that the money needs to be moved.

I know that check is tempting, but rather than cashing it, roll it over into a new account. You will thank yourself in 20 years. When you cash out a 401k early, you lose a chunk to taxes and penalties right away, but the real loss is all the compounding growth that money would have generated over decades.

Personally, I have rolled all of my accounts into a Vanguard account, as they have some of the lowest cost funds and impeccable customer service. There are other great options out there too, like Fidelity and Schwab, but the key is to pick one place and consolidate. It makes your life simpler and your money easier to manage.

What Happens If You Cash Out Instead

Let's say you leave a job and have $10,000 in your 401k. If you cash it out, here is what happens:

• Federal income tax (22% bracket): -$2,200
• 10% early withdrawal penalty: -$1,000
• State tax (~5%): -$500
• You walk away with roughly $6,300

But if you had rolled that $10,000 into an IRA and left it alone for 25 years at an average 8% return, it would have grown to over $68,000. That is the real cost of cashing out.