Have you seen the latest article on Yahoo! Finance? I recently read “The Millionaire’s Retirement Plan,” where the author explains that to stay on track for retirement, 25 year olds should save $200 a month, 35 year olds $400 a month, 45 year olds $450 a month, and 55 year olds $600 a month until retirement.

I first got into personal finance by reading Yahoo! Finance articles a few years ago. Since then, they have added some great writers and started a Financially Fit section, which I think it pretty cool. It gives everything from tips on how to lower your cellphone bill to four ways to all sorts of retirement advice. So it holds a special place in my heart, but this article was way off base with me.

Sure, as you make more money, you are able to save more, but $200 a month seems low for a 25 year old. That comes out to just $2,400 a year.

Ideally, I’d tell everyone to flip this plan on it’s head and reverse the savings patterns. By investing $600 a month as a 25 year old, $450 a month as a 35 year old, $400 a month as a 45 year old, and $200 a month as a 55 year old, you’d be almost twice as rich at age 65. That’s what I’d do (and what I am actually doing), but there’s one glaring mistake about their plan.

It doesn’t take advantage of time!

A smarter idea? Max out your Roth IRA when you are young. Invest $5,000 a year. That’s a little over $400 a month. Sure, for some people it would require diligence, but the benefits are tremendous. If you made this change for ten years (and then followed their plan for the next 30 years), you’d be over $400,000 richer.

That’s right. Invest $2,600 extra for 10 years, and you’ll get $400,000. Do I sound like an infomercial? It almost sounds too good to be true.

Or, you can think about it this way. By investing under my plan, you’ll be able to retire on the same amount of money 4 years earlier. Pretty sweet, right?

This article completely misses the time value of money factor. Investing when you’re young is so much more valuable than if you wait until you’re older.

Yes, you’ll make more money when you’re 35 or 45, but you’ll also have a ton of responsibilities. You’ll be paying for a house, kids, schooling, and tons of things you never planned for. When you’re young, you’ve got an apartment, maybe a car, and some extra spending money, that’s it!

If you make it a priority to save, you’ll be way ahead of the game! I won’t talk to the fact that a million is becoming harder to retire on.

Readers, do you think $200 a month is enough? Should we flip this thing on it’s head?

I’m very lucky to have a Roth 401k retirement plan through work. In addition to the Roth IRA maximum contribution of $5,000 in 2010, I’m also allowed to make a contribution of $16,500 to my Roth 401(k). Most people don’t have that opportunity and I think there’s a problem with the system.

Why should retirement plans be dictated by work? It doesn’t seem fair that I am able to contribute more post-tax (which is great if you’re young and not making that much money) than my friend who works for Starbucks. Our employers don’t dictate how much we can contribute to our Roth IRA plans, so why should they have such a say in our Roth 401(k) plans?

I understand that with certain jobs, there are perks. Some people get discounts, some get profit-sharing, and some get a nice healthy 401(k) match. That’s amazing and I’m jealous of them, but I understand that they are sponsored by the company. So why should companies get to dictate how much I contribute to certain types of accounts?

Is the Roth 401(k) really a perk? Some companies feel that the administrative burden outweighs the benefits, but for employees, many would prefer to contribute their post-tax dollars to their retirement account instead of being forced to contribute pre-tax money.

Why not enact a law that makes it mandatory to give employees the option to set up a Roth 401(k) if the company already allows employees to contribute to a traditional 401(k) plan? I can’t imagine the administrative fees for Roth 401(k) plans are higher than traditional 401(k) plans. Under my proposal, people would be able to do what’s best for their situation and companies wouldn’t be able to dictate how much employees can contribute pre-tax and post-tax.

There are always fees for employers, but I think this one is worthwhile. Why should they choose to only allow traditional retirement accounts and not allow for the Roth versions? Not all employees are in the same situation, and they shouldn’t be treated like they are. As new changes are made (allowing Roth 401(k)s in the first place), changes need to be made in workplace policies as well.

Readers, do you have the option to contribute to a Roth 401(k)? If you could, would you take advantage of another $16,500 in Roth contributions?

This is a guest post by Barbara Friedberg.

“Our life is frittered away by detail…..simplify, simplify.” – Henry David Thoreau

The distractions are everywhere. Thoreau noticed it over 100 years ago, and he didn’t even have the internet. Today, it’s worse. Pay attention, or you will get swallowed up in minutia.

As I was working in the library on the preparation for the MBA class I’m teaching at a local college, I headed to the periodical section for a quick read of the Wall Street Journal. Before I arrived at the Wall Street Journal, I looked at most of the covers of the magazines on display. I was especially struck with O Magazine’s cover story about how to get rid of clutter. But, I forced myself not to get distracted, a major feat in and of itself! Because I really wanted to read the clutter article.

Next, I pulled out the Wall Street Journal; STOOD next to a table, did not sit down, and divided the paper up. I knew from experience that only about 10-15% would be of interest, so I challenged myself to skim the relevant sections RAPIDLY.

Then it hit me. There are so many distractions everyday, it’s amazing I get anything done at all. (Unfortunately, some days I don’t get much done!)

I reminded myself that part of enjoying life & being productive is separating the important from the unimportant. In fact, that applies to almost any aspect of life.

Pareto’s Principal indicates that there is not a 1 to 1 relationship between the amount of work you put in and how much you benefit from that work. In fact, according to dictionary.com:

“Parento’s principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.”

With that in mind, I am constantly trying to find the 20% effort that will give me the 80% results. (Unless I’m just feeling lazy!) Believe me, it is more difficult than it sounds.

But I am certain of one thing, cutting out as much external and unnecessary activity, such as obsessing, surfing the net, wandering around etc. adds to my contentment and productivity.

Practical Application: A Simple Investing Plan

How does this relate to personal finance? First off, you can ditch most of what your read about getting rich, investing, etc.

Investing is very simple. There are only a few things to do to grow your wealth!

• Invest regularly
• Place your investing dollars in 2 or 3 low cost index funds. The Vanguard Total World Stock Index Fund (VTWSX) and Vanguard Total Bond Market Index Fund (VBMFX) are two examples.
• Subtract your age from 100 and put that percent in the index fund; Put the rest in the bond fund.

Let’s say that you are 32 years old.

Step 1: 100-32=68; Put 68% of your investing dollars in stocks.

Step 2: 100-68=32: Put 32% in bonds.

If you start with $300 per month starting at age 32, you’ll have invested $144,000 in 30 years but you’ll have a total of $485,150!*

*Assumption: 7% compounded annual rate of return long term (9% from the stock fund & 5% from the bond fund; in line with historical averages).

If you did nothing more than this, you would be financially ahead of most. If you are more ambitious, you could increase the amount you invest and start earlier. The principle remains the same.

Many people will try to sell you lots of products and tell you about a myriad of investments, but most of these investments will not improve your performance any more than the above example.

In fact, the greatest determinants of long term investing returns are:

• Time in the market; the longer, the better.
• Diversification; A widely diversified portfolio yields the best long term results with the least risk.

When presented with an investment idea or product, ask yourself these 3 questions:

• In order to invest in this product how much will I have to pay and to whom?
• How does the investment work and is it complicated?
• Is the name of the investment long, complicated and confusing?

If your 11 year old kid can’t understand it, walk away.

Keep your life and your investments simple.

Do not be afraid to walk away if the article, activity, or person is adding to the “noise.”

If nothing else, get rid of superfluous activity for one day. Practice a “NOISE” fast.

Readers, what “noise” do you have in your life? What are simple investing rules you use to weed out the bad investments?

This is a guest post by Barbara Friedberg, MBA, MS. She is committed to Educate, Inspire, Motivate for Wealth in Money and Life at her site, where she provides instruction and motivation for becoming wealthy by teaching basic personal and financial wealth building principles.