How to Enroll in Your 401(k) the Right Way

Learn to enroll in your 401(k) plan correctly, maximize employer matching, and set up automatic contributions for retirement.

  1. Find out when you're eligible and enroll immediately. Check with HR about your eligibility period — some companies let you start right away, others make you wait 90 days or until the next quarter. Mark your calendar and enroll on the first day you can. Every day you wait is money you're not earning and potential employer matching you're missing.
  2. Contribute at least enough to get the full company match. Find out your employer's matching formula — common ones are 50% of your first 6% or 100% of your first 3%. If your company matches 50% of 6%, you need to contribute 6% of your salary to get the full match. This is free money with an immediate 50% or 100% return.
  3. Set your contribution percentage, not a dollar amount. Choose a percentage of your salary rather than a fixed dollar amount. This way your contributions automatically increase when you get raises. Start with whatever gets you the full match, then work toward 10-15% of your income if possible.
  4. Pick a target-date fund for hands-off investing. If you're overwhelmed by investment options, choose a target-date fund with a year close to when you'll turn 65. These funds automatically adjust from aggressive to conservative as you age. They're designed to be your only investment — you don't need to pick anything else.
  5. Choose traditional or Roth based on your tax situation. Traditional 401(k) contributions lower your taxes now but you'll pay taxes when you withdraw in retirement. Roth contributions are taxed now but withdrawals are tax-free later. If you're in a low tax bracket now, lean toward Roth. If you're in a high bracket, traditional often makes more sense.
  6. Set up automatic increases and review annually. Many plans let you automatically increase your contribution by 1-2% each year. Turn this on if available. If not, manually review and increase your contribution each year when you get a raise. Aim to increase by at least half of any raise you receive.