It's never too early to start saving for retirement. So whether you're 25 or 55, if your workplace offers a 401K plan, you should probably take advantage of the opportunity to make use of it. Although the world of investment can be very complicated, Fidelity 401K plans are designed to make things easy for you, even if you have no experience with investing or other financial background.
Make sure you can afford to invest in a 401k. Saving for retirement is important, but if doing so will leave you in debt today, you're better off paying down your debt instead.
2
Calculate your monthly expenses. Make a list of everything you spend in a month. Don't forget to add yearly expenses and divide by twelve for annual things like taxes, repairs, insurance, &c.
3
Figure out how much take-home pay you need per pay period. If you get paid twice per month, you'll want to divide your monthly expenses in half to get a per-paycheck total. A good rule of thumb is to total all your expenses and then add fifty dollars for miscellaneous.
4
Calculate how much you can afford to invest. Remember, 401K contributions are made from pre-tax dollars, so even if you can only afford to drop fifty dollars per paycheck, you'll really be saving closer to a hundred and fifty per month.
5
Choose a mutual fund allocation. Your company's HR manager should make sure you get forms to allocate your investment, or give you instructions how to do it online.
6
Take advantage of the Freedom Funds. If you don't want to read through lots of complicated descriptions to learn about dozens of different funds, invest in a Freedom Fund keyed to your projected retirement year. Fidelity offers these funds which will automatically invest in a diverse portfolio for you, and change your investments to become more conservative as you approach retirement.
Tips & Warnings
If you want to play around a little, invest 80% of your 401K in a freedom fund, and invest the other 20% in a few stocks of your choosing.
Don't invest all your money in risky funds unless you can afford to lose it; a balanced portfolio is a better option.
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