- 1). Review the details of your employer's 401(k) plan. Determine your date of eligibility for the plan and find out if you will be enrolled automatically. Learn about the employer fund-matching structure, if any. Find out if there is a Roth savings option -- an opportunity for after-tax contributions -- or if the plan is a strictly traditional, pretax plan.
- 2). Determine the amount that you are able to save. Balance your future savings with current financial needs and any current debt; unpaid debt is costing you interest. Consider your savings in light of your employer match, which is like getting a raise in salary without having to do any work; take full advantage of that opportunity, if it exists.
- 3). Decide if you want to make Roth contributions, if your employer offers them. While Roth contributions do not offer any current tax benefit, income withdrawals from a Roth account after retirement are tax-free. Some savers prefer one type of account to the other; others, depending on their current and long-term goals, make use of both types. All employer contributions, such as matches and profit sharing, are pretax, traditional contributions, even if you choose to make Roth contributions.
- 4). Study investment options. Most 401(k) sign-up paperwork offers you a chance to create an initial investment allocation, saving you the hassle of doing it later. It is helpful to know where you want the money to go before completing your enrollment. Read mutual fund prospectuses and review investment options online at reputable financial sources.
- 5). Complete all required paperwork. In most cases, you select a deferral percentage based on your salary, but some plans may offer a flat dollar rate. Choose a contribution type -- Roth or traditional -- and select an investment allocation. Fill out the beneficiary form, which overrides any stipulations in your will; ensure that both documents are kept up to date.
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