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Step 1
Calculate the amount you want deducted out of your paycheck for your 401k plan. You will have the option to deduct this pretax or after tax--most use the pretax option for end-of-year tax benefits. Consult a professional tax consultant for additional information if needed.
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Step 2
Estimate the worth of your contributions. Check to see if there is a company matching program and how much will they match. Some companies match $.50 on a dollar, and others match dollar for dollar. This amount can vary, but it's imperative to know beforehand to estimate how much your savings can amount to on a quarterly basis.
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Step 3
Know the 401k plan's investment options. Basically, 401k plans give you a variety of options to choose from such as mutual funds, bonds or money market investments. This can get tricky if you have never dealt with these types of funds. There are risk levels involved, but 401k plans are made to be flexible, and you do not have to keep your money in one particular fund. If one option doesn't work out for you, choose another.
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Step 4
Check out if your 401k plan allows you to borrow or withdraw from your plan and what the penalty will be. Typically, you do not want to withdraw any money out of the account until you retire, but if a situation arises and you need money without huge interest rates, then a 401k plan will be helpful. You get to pay yourself back, but if you continue to take out money, this savings plan can lose its purpose if a hardship keeps you from putting money back in.
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Step 5
Get information on what happens to your retirement plan once you are vested with the company and you quit the company or are terminated from the company. Usually you can roll over the money to an IRA account within 60 days, or you can withdraw it. Consult a benefits representative to get that information.
