Just as you are learning where your desk and the restroom are, Human Resources is asking you to make decisions that impact your future. Retirement account choices are probably the most daunting.
When can I contribute? Most companies allow you to establish a retirement account after six months of employment.
How much should I contribute? If your company offers a matching contribution then deduct at least the minimum needed to get the full match. For example, if your company matches 50 cents on the dollar up to 3 percent of your contribution, then contribute at least 3 percent. This is free money and something you must take advantage of.
Which company should I choose? Some companies will give you one choice, others will give multiple choices. If you can avoid using an annuity or insurance company, I would. They typically have higher fees. Many low-cost mutual fund companies such as Vanguard and Fidelity are available to employees. I would recommend these firms even though the paperwork isn’t as easy as the insurance company’s. They send an agent to your office and complete the forms for you.
Which investment choices should I make? Try to look at your new retirement company’s website. If you are young, you can choose more growth funds and less bond funds. Think about how hysterical you would be if we had another year like 2008 when many plans lost one-third of their value. On a scale of 1 (I know we are in it for the long haul) to 10 (a total freak out) what is your tolerance for risk?
What does “vested” mean? When you leave the company, you will hear about “vesting." This only applies to the money the company has added to your accounts. They usually require you to stay with the company for a certain time to be able to withdraw their contributions. We can’t blame them, contributing to your retirement account is one way to get you to stay at the company.
Good luck, chose wisely and evaluate often.