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Contrary to conventional wisdom, investing NOW! NOW! NOW! in a 401(k) is not the right answer for everybody. For many people, it is a great personal finance choice. And if you intend to live comfortably in retirement, a 401(k) is part of the foundation of that comfortable life. And I will even agree with most commentary that says the earlier you start saving, the better off you are. That is called the time value of money, and it is a result of how investment returns are compounded.

But a 401(k) is only one part of your retirement plan, and there are aspects to a healthy financial future that you absolutely MUST put in place before you start putting too much effort into private retirement plans.

Question 1: Do you have an emergency savings account in place? If you do not have a small nest egg to help you ride out the ups and downs of life, wait just a couple of months before you start putting money into a 401(k) and concentrate first on setting aside enough to live for a few months in an emergency. The long term danger that you are placing yourself into as a result of not having sa cushion of money for unexpected expenses far outweighs the benefits of getting in on the 401(k) right now. Why? Let's assume that you sock away $10,000 in your 401(k) this year, but have no easily accessible savings. Next year, you lose your job. How will you keep food on the table for a few months until you are back on your feet? Say good bye to that 401(k), and say hello to penalties for early withdrawal of retirement funds.

Question 2: Is your debt under control? As important as it is to get the compounding interest working on your behalf soon, if you are a consumer debt train-wreck, every day is putting you farther and farther behind. Sure, your 401(k) is earning 10% a year, compounded and tax deferred. But your credit cards are costing you 21% a year, compounded, and it's been well over 20 years since credit card debt was tax deductible. It's painful, I know, but the best retirement account in the world cannot hold off bankruptcy if you have as much in credit card debt as you have in your retirement accounts. Before you start squirreling away for retirement, kick the credit card habit and get your house in order.

Question 3: Have you fully funded your IRA? If you have taken care of the first two questions, then you are in the enviable position of figuring out which type of retirement savings plan is best for you. That is a whole different topic. But remember that your contributions to your IRA are capped at a much lower rate than your contributions to your 401(k). Why does that matter? Assume that you have $10,000 to invest this year, and you expect that your disposable income will increase over time. If you miss your chance to put your $4000 to $5000 in your IRA now, you will never get it back. Get your IRA fully funded now, and when you have the luxury of paying into both an IRA and a 401(k), you can catch up on the "missed" 401(k) contributions easier.

There is one exception to this final rule: if your employer matches your 401(k) contributions, you might want to contribute enough to get the match, then fully fund your IRA.

The 401(k) (and its cousins: the 403(b) and TSP) are GREAT ways to save for a comfortable retirement. But do not fall into the trap of thinking that TODAY is always the best day to start contributing. If you have not set aside a basic emergency fund, or if you are living on borrowed money in the form of credit cards and car payments, today is not the best day to start contributing. Maybe tomorrow will be, but get your house in order first.

Learn more about this author, Sue A. Sponte.
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