A 401(k) is a retirement account through your employer. Many employers 'match' part of what you contribute — that's free money on top of your paycheck. Contribute at least enough to get the full match; skipping it is leaving guaranteed money on the table.
What the match means
A common setup: your employer adds, say, 50 cents (or a dollar) for every dollar you put in, up to a few percent of your pay. That is an instant return you cannot get anywhere else. If you contribute enough to get the full match, you've basically given yourself a raise that goes straight to your future.
How to set it up
- Ask HR (or check your benefits portal) what the match is.
- Set your contribution to at least the amount that gets the full match.
- Choose a low-cost fund option (often a target-date or index fund).
- Increase your contribution a little whenever you get a raise.
Not contributing enough to get the full match is one of the most common money mistakes new workers make. It's the closest thing to free money you'll ever be offered.
Common questions
What's 'vesting'?
Some employers require you to stay a certain time before their matching money is fully yours. Your own contributions are always yours. Check your plan's vesting schedule.
What if my job has no 401(k)?
Then a Roth IRA you open yourself is a great alternative. See 'How to open a Roth IRA.'