How to opt into a 401(k)

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How to opt into a 401(k)

Saving for retirement is something that everyone should do. One way to do that is to open a 401k. If you started a new job or recently decided that you want to start saving for retirement you may be wondering: how exactly do you opt into a 401k?

We can answer that question, or at least send you in the right direction. How difficult the process of opting into a 401k plan will vary by company and plan, but is typically a painless process. If you are looking to enroll in a self-employed 401k we’ll cover that as well.

The two-step process to opt into your company’s 401k

Here is the process of opting into your company’s 401k broken down into two simple steps:

1) Find out where to enroll

The first place you should go to find out information about your company’s 401k offering is the employee website. Most large companies have a main website that is only for internal employees. This is typically where you would also find other resources like company-approved PowerPoint templates, IT support information, and employee news and announcements.

Most companies will have a benefits page within their employee website. This will include information on health insurance, dental insurance, and other benefits available to employees. It should be fairly easy to find the retirement plan benefits. Retirement benefits are typically administered by a third party, such as Fidelity, so you may be taken to a different company’s website at some point in the process.

If you work for a smaller company you may have to do a little investigative work to opt into your 401k. You may not have a company intranet with employee resources neatly laid out. Heck, you may not even have a full-time human resources employee. If this is the case, you should ask your manager where to go to opt into your 401k. Another option would be consulting the employee manual, which should explain exactly what 401k benefits are available, who administers them, and how to get enrolled.

Regardless whether you work at a small business or large business, always ask if you can’t figure out how to enroll in your company’s 401k. Be persistent! A 401k plan is typically part of your overall compensation, so you are entitled to enroll if you want.

2) Set your contribution limit

Deciding exactly how much you need to save or should save for retirement is beyond the scope of this article, but setting your contribution limit to something is always a good first step. Contributing something to a retirement account is always better than contributing nothing.

If you are lucky enough to work at a company that matches your 401k contributions dollar-for-dollar, take advantage of it!. Be sure to contribute at least as high a percentage as your employer matches. Anything less is leaving money on the table and is, in essence, voluntarily giving yourself a pay decrease.

If you don’t have an employer match there is no “minimum” recommended amount; it will vary based on your current income, what debt you have, and other factors. I personally think anywhere from 10-25% is a good “target” percentage. If you have debt or savings goals you might want to consider starting lower but planning on slowly raising it over time. You can typically change your contribution percentage at any time.

How to enroll in a self-employed 401k

Self-employed workers are no different than those who work for companies: they want to retire too!

An individual or self-employed 401k is not that much different than any other 401k; it’s just for a business that is made up of one person instead of one that has employees. The nice thing about self-employed 401ks are that companies that administer these accounts typically will be gracious with things like their minimum opening balance and service fees. Many have no minimum requirement to get started and no maintenance fee.

With a self-employed 401k plan you have no human resources representative to reach out to if you get stuck or want someone to walk you through the process. If you work at a small business you may run into the problem as well.

Despite not having a human resources contact to walk you through the enrollment process you shouldn’t be too concerned. There are plenty of companies that are more than happy to help you establish a self-employed 401k, such as eTrade or Charles Schwab.

David Carlson works in finance and is a personal finance blogger at Young Adult Money.  You can find him on twitter @YoungAdultMoney or @DavidCarlson1.