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401(k) Choices Smart People Make

Retirement plans such as employer-sponsored 401(k) plans are designed to help people save for retirement by offering tax benefits and employer matching contributions. Make the most of them.

(Photo Credit: takeasmartstep.com/Flickr)

1. Get started right away.

Sometimes employees do not enroll in the employer's 401(k) plan at their first opportunity. They may not be certain that they will stay at the company for many years to come. After they end up staying, they decide to enroll, but they missed out on years of employer contributions to their own retirement savings.

Even if you don't think you will stay at your current employer for ten years or more, enroll in the 401(k) as soon as you are eligible. Worst-case scenario is you will be able to roll over your retirement savings into an Individual Retirement Plan (IRA) when you leave your job. You will have more money to show for it.

2. Use employer matching.

According to the Wall Street Journal, many employees make the critical mistake of leaving an employer match on the table. Look at it this way: even if your employer matches 5 percent on your 5 percent contribution, that's still free money. Make sure you take advantage of this benefit.

3. Do not take 401(k) loans.

Avoid the temptation to take out a 401(k) loan. In addition to the fact that the money is there for retirement, experts at CBS MoneyWatch points out that some 401(k) plans require full repayment of any loans within 30 days of leaving your job. If you should lose your job for any reason, this could spell financial disaster.

Tell Us What You Think

How are you saving for retirement? We want to hear from you! Leave a comment or join the discussion on Twitter.

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