Your employer should have some directions for filling out the enrollment, form but if not, be sure to ask your HR department for assistance.
If your employer matches contributions, be sure to contribute enough so as to max out any money offered by your employer.
If you don't take advantage of your employer's match, you are leaving money on the table.
How to decide how much to contribute
After taking advantage of any employer match, you will need to decide if you are able to contribute more to your retirement savings.
If you are just starting out, money may be tight. Setting a percentage of your income aside might be the easiest way to determine an amount.
Next you will need to chose a fund or funds in which to place your contributions.
You employer will have chosen a brokerage to host the 401(k), 403(b) or 457 Plan. The brokerage will offer an array of investment options for you to chose from.
The best principal for choosing a fund when you are just starting out is to keep it simple.
Generally, the longer you have until retirement, the more risk you will want to take, as riskier funds will produce the largest returns over time.
The market will go up and down, but over time it will average out, and stock-based funds will perform better in the long run.
A reasonable approach would be to spread your investments equally into four funds.
- A domestic stock-based (90% stocks / 10% bonds, certificates cash etc.) that is focused on large-cap companies (big companies).
- A domestic stock-based fund focused on medium-cap companies.
- A foreign stock-based fund (large or medium cap).
- A domestic moderate-risk fund (70% stock / 30% bonds, CD's, cash etc.
It is hard to go too wrong with managed mutual funds or ETF's. The choice is yours to make based on your tolerance for risk.
Just remember that more risk typically equals more return over time. However, in the short run, riskier investments will tend to fluctuate more with the market.
When you begin to approach retirement age, you will want to shift your money into more stable funds.
Some general tips for your 401(k), 403(b) or 457 Plan investments:
- Make sure you take advantage of any matching funds from your employer
- Contribute as much as you can afford now, and plan for regular periodic increases
- Even a small contribution now can grow exponentially over the years
- Try and increase contributions at least every year, if not more often
- Consider putting a portion of every salary increase or raise into your retirement fund
- Aside from regular contribution increases, leave your fund alone and let it grow
- Plan on a mid-career check-up to adjust fund contributions
- Begin to make a retirement financial plan about 5 years before you retire
- Consult your financial advisor if you have any questions
Credits:
Created with images by Sharon McCutcheon - "A twenty-four year old woman counting dollar bills." • Fabian Blank - "Cute piggy bank" • Kelly Sikkema - "untitled image" • Kelly Sikkema - "untitled image" • Carlos Muza - "Statistics on a laptop" • Austin Distel - "Daytrading bitcoins financial markets at a coffeeshop. This photo is free for public use. Please credit this photo in caption with link to "www.distel.com"." • Austin Distel - "This photo is free for public use. ❤️ If you do use this photo, Please credit in caption or metadata with link to "www.distel.com". " • rupixen.com - "untitled image" • Luís Eusébio - "Sundial" • Jon Tyson - "untitled image" • Jen Theodore - "Set of four brass vintage skeleton keys on neutral background. Very steampunk look!" • JOSHUA COLEMAN - "Deep within the walls of costume houses, there is a section for anything and everything. Finding the right item for the right costume for the right actor is like finding a needle in a haystack. Sometimes, you come across a wall that has, literally, thousands of hats like these and with the right imagination, you can make your vision come to life. Another day in the life of a movie and tv costumer." • Jon Tyson - "untitled image"