How to Enroll in a 401k Program

If you are getting your first job or if you are now starting the journey to save for retirement, a 401k plan is a great place to start.  A 401k plan is a retirement savings program.  They are employer sponsored.  For that reason, you need to work for a company that has an available plan.  If that plan is available, what is the next step?

You may not have to do anything.  Some companies automatically make 401k plans a part of their compensation program.  This means that you may automatically be enrolled in a program.  Since this is rare, it is best to ask.  Even if your enrollment is automatic, it is still up to you to determine your contributions.

As previously stated, you need to ask your employer about a 401k.  If you are job searching and concerned with retirement, ask all prospects.  Even if you have yet to be hired, consider this. You want and need to save for retirement.  A 401k is a simple way to do so.  If you have two similar job offers, but only one company sponsors a 401k program, opt for that company.

Ask about employer contributions.  Many companies sponsoring 401k programs reward their employees with contributions.  For high-level and long-term employees, the match may be 100% or more.  Even if only 25%, consider this free money! For example, in our experience, many companies will match something like 100% of the first 5% that you deposit each check.

401k programs are optional and company sponsored.  If your company does sponsor a program, you still may not qualify.  Some have rules and restrictions.  For example, you may have to wait 90 days before gaining admittance.  Some companies have open enrollment periods.  For example, you may only be able to setup a 401k in the month of January.  If this is the case, make a note on your calendar.  Remember to signup and setup an account when allowed.

If and when you are able to enroll in a company sponsored 401k program, you will be given enrollment papers.  Fill out these documents.  If you need any assistance, speak to a financial adviser or ask a company representative for clarification.  These documents must be completely and accurate filled out.

When completing your 401k enrollment paperwork, search for sections with alternatives.  For example, with married couples, the spouse is automatically designated as the sole beneficiary in the event of death.  If you want another family member to be this beneficiary, take the steps necessary.  If that information is not available on your form, speak to a company representative.

Also on your enrollment paperwork, you will be asked how much you want to contribute.  If in your early 20s, you can start out small.  With that said, remember that this money will grow overtime.  The more you add, the more you stand to have for retirement.  A good approach is to track your expenses.  Do this for a week, if you don’t have a short deadline.  How much money do you spend in an average week?  Times this by four and add in other expenses, such as mortgage, car, groceries, utilities, and insurance payments.  Try to set aside at least $100 a month for traditional savings.  Anything extra, consider contributing to your 401k.  You can change this amount later.

Once your enrollment papers are complete, you will be able to designate your investments.  If young, choose from a collection of money market funds, bonds, and stocks.  If nearing retirement, opt for low-risk investments, like bonds and money market funds.  Speak to a financial advisor and use the internet to research your options.  Find the most projected profitable choices.

Author: Dr. James Hans

Dr. James Hans is a personal finance expert, who has dedicated his life to providing financial education in the areas of personal finance and investing.

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