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.
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.