401(k) Basics: 7 Things You Should Know When You Enroll

When you start a job there’s a ton of paperwork to fill out, but don’t let that keep you from carefully considering what to do about signing up for your 401(k). Here are some basics to know to make the right moves.

A woman peeks out above a pile of paperwork.
(Image credit: Getty Images)

Enrolling in an employer’s 401(k) plan can be one of the easiest ways for a worker to save for retirement.

If you’re new to 401(k)s, it may seem prudent to do whatever the guy sitting next to you says he did — especially if the enrollment forms are included in a pile of orientation paperwork you want to get through quickly. But if you follow a co-worker’s recommendations, or use the plan’s default options and then never go back to review and update your choices, you could miss out on important opportunities to maximize your retirement savings.

Whether you choose a traditional 401(k) or a Roth 401(k), you’ll receive some sort of tax break. Any matching contribution you might receive from your company is like getting free money. And by making contributions through automatic payroll deductions, you can build your account without being tempted to spend the money elsewhere.

Although there’s no way to know how much income you might ultimately receive from your investments — given the unpredictability of the market — there aren’t many financial professionals who would advise against using a 401(k) as part of an overall retirement plan.

That doesn’t mean, however, that you should forgo reading up on your plan’s rules, the investment options available, or any hidden fees that might eat away at your nest egg over time. Even if you’ve had a 401(k) before, the specifics can vary from one plan to the next.

Here are some things to look for (or ask questions about) when you sign up for a 401(k):

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Todd Schick, CFP®, CLU®
President, Aspire Wealth Management

Todd Schick is the president and financial adviser at Aspire Wealth Management (www.aspirewealthmgt.com (opens in new tab)). He is a CERTIFIED FINANCIAL PLANNER™ and has earned the Chartered Life Underwriter® and Chartered Financial Consultant® designations.