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So, you just graduated college and landed your first “real” job. Congratulations! Now, you get to start working toward the fun parts of adulting, like figuring out how to invest for retirement.

Sure, it may feel like you’ve got forever to save. But retirement will be here sooner than you think… and the earlier you start tucking cash away, the harder it can work for you.

Here are 10 tips to ensure that you’re making the most of that shiny new 401(k) right away.

401(k) Tips for Beginners

If you’re just getting started, here are some suggestions for getting the retirement savings ball rolling.

1. Wrap your head around compound interest.

If you haven’t already learned about compound interest in your 16+ years of schooling, now is the time. Simply understanding the power of your money’s growth can keep you motivated to save.

Check out this article for a primer on how compound interest works. Then, run your potential savings through this calculator. Run a few different scenarios, and you’ll get a grip on the most important part of compound interest: time.

That’s right. The more time you have, the less you’ll need to save — by far!

Related: Build Savings Habits With These 7 Apps

Need an example? Check this out:

Sarah starts out with $0 in her brand new 401(k). She puts off investing for a few years, assuming she’s got plenty of time to save for retirement.

Once she finally starts contributing, she puts $100 per month into her account. Since she doesn’t start investing until she’s 30, she saves $100 per month for 35 years until retirement.

Jamar, on the other hand, realizes how important it is to save early (and often). He starts investing $100 per month in a 401(k) as soon as he gets a job at age 22. Because of this, he will get to save for 43 years before retiring.

Sarah and Jamar are both estimating a 7% annual interest rate, and their accounts compound monthly. By age 65, Sarah has $180,105 in savings. But Jamar? He’s saved a whopping $327,612.

By saving a mere $9,600 more and starting 8 years earlier, Jamar manages to end up with nearly $150,000 more than Sarah!

That, folks, is the power of compound interest. And that is why you’ll want to start saving as soon as possible.

2. Fully understand your options.

Now that you know why you need to save, get your head around how.

You’re not limited to saving in your employer-sponsored plan. But it’s often a good place to start for two reasons: these accounts carry tax advantages, and employer-sponsored options have high contribution limits.

This means you’ll save more money in this type of account, since you won’t pay taxes on earnings. You’ll also be able to save a lot more as your earnings grow, because of the contribution limits.

Resource: Current 401k Contribution Limits

Still, you need to fully understand the retirement options your employer offers before you decide to sign up. This means digging into the details of the type of plan offered, the investment options, and any employer matches or other benefits for which you might be eligible.

Also, pay close attention to the plan’s vesting structure. Vesting is common when employers make contributions to your account, whether through a matching program or a standing benefit. If you’re not fully vested in your 401(k) and leave your job, you may lose some (or all) of the employer-paid portion of your 401(k).

Be sure you understand how all of this works with your employer when you first open your retirement account.

3. Enroll in automatic deductions right away.

The best way to get in the habit of saving for retirement is to enroll in automatic deductions.

Do this before you even see your first paycheck! That way, your monthly contribution comes out before the money hits your checking account.

This is helpful for two reasons:

    1. You don’t get used to having that money to spend. Wait a few months to decide to enroll in automatic deductions, and that suddenly smaller paycheck will seem like a squeeze. But if you enroll in the plan immediately, you won’t miss the money you never “had” in the first place.
    2. You may be eligible for more benefits. You may only be eligible for employer matches to your 401(k) contributions if you enroll in payroll deductions. And these deductions come out pre-tax if you have a traditional 401(k), ensuring that you get those benefits, too.

Learn More About Automating Your 401(k)

Ok, so you know how to start funding your 401(k). Now, how much should you contribute?

4. Put in at least enough for employer matches.

When deciding how much to save, be sure that you put in at least enough to get your employer match. This usually works in one of two ways:

  • Percentage match: Your employer will match your contributions up to a certain percentage of your gross salary.
  • Dollar match: Your employer will match your contributions up to a certain dollar amount.

There are plenty of variations here, though. For instance, some employers will do a 100% match up to a certain cap. If you put in $50 per month, they’ll put in $50 per month.

Others, though, incentivize you to save even more by matching only a percentage of your contribution. For instance, an employer could match 50% of your contributions for a monthly cap of $100. So, you’d have to put in $200 per month to get the full matching amount.

Whatever your employer’s incentive, be sure that you understand it. And do whatever you possibly can to get that full match amount. Otherwise, you’re leaving free money on the table.

Resource: 8 Strategies for Stressing Less About Retirement

5. Aim to save 10% of your gross pay.

Financial gurus have loads of ways to help you see if your savings are on track for retirement. But since you’re likely decades away from full retirement, those could bog you down in details.

Instead, you might aim for a simpler goal: saving 10% of your gross annual pay.

This helps you in a couple of ways. For one thing, 10% is a significant chunk of your pay, regardless of how much money you make. But also, saving this much gets you used to living on a little less. Starting that habit now can help you save even more as you get raises in the future.

Remember, though, that this is just a rule of thumb. If you’re in the middle of paying off high-interest debt, 10% may be a bit too high for you right now. But try to get there as soon as you can.

If you want to retire earlier or just build wealth more quickly, aim higher than 10%.

Related: How Much Should I Have Saved for Retirement, Based On My Age?

6. Figure out how to balance debt and savings.

If you’re like the majority of recent college grads, you’re dealing with student loan debt. Maybe you have other types of debt, too, like credit cards or a car loan.

So, how do you balance paying off your debts with meeting your 401(k) savings goals?

Honestly, it depends. Some financial thinkers will say you should pay off all debt before you save for retirement. But that’s often not the best choice.

It’s really best to look at your financial picture from a holistic standpoint. Will you get a better return on your investment if you save for retirement, or if you pay off debt?

It depends. And often, it’s best to do a mix of both.

Though it varies based on your specific situation, here’s one option for tackling the debt-vs-savings question:

  1. First, save enough to get your company’s match (because, free money!).
  2. Next, throw extra cash at high-interest debts.
  3. Finally, divide your extra money between paying off lower-interest debt and investing for retirement.

Learn More: 5 Things I Did in My 20s That Made Me Rich in My 40s

Advanced 401(k) Tips and Tricks

The first six tips are the most important if you’re just getting started. But once you’ve opened and started investing in your 401(k), use the following tips to manage your money even better.

7. Manage your asset allocation.

When you first start saving for retirement, you might be too overwhelmed to do much hands-on management. And that’s okay. But once you get your feet wet, you need to understand what you’re actually investing in.

Many company 401(k) plans offer target-date investing. This is basically an automatic way to manage asset allocation, or the mix of investments in your portfolio.

Target-date funds will start you off with more money in higher-risk, higher-reward options like stocks. As you get closer to retirement, your portfolio will shift towards lower-risk options like bonds.

Asset allocation is a tricky topic. But handling your allocation on your own could help you make the most of your investments. And at least understanding how it works will let you keep an eye on your target-date fund’s performance wisely.

Related: How to Evaluate an Investment Portfolio

Have no clue what I’m talking about here? Check out our articles on asset allocation and finding the right balance for your portfolio here.

8. Dig into fees.

One of the biggest potential losses in your 401(k) is something you may not even pay attention to: fees.

Since you understand compound interest, you can understand the difference a few bucks a month can make over the course of thirty years. Fees that differ by just half a percentage point can cause some serious problems with your portfolio.

Typical 401(k) plans have administrative fees, advising fees, commissions, mutual fund load fees, and more. Those nit-picky expenses can really add up. And it’s difficult to even pin down exactly how much you’re paying in fees.

Check out this article for a more in-depth summary of fees and how to find them.

What do you do if your plan has higher-than-normal fees? You may be able to change your investments or strategy to mitigate some of the expenses. Or you may have to try step nine below.

9. Learn to deal with crappy 401(k) plans.

Some employers don’t offer great 401(k) plans at all. They may have limited investment options or high fees. Or you may just lack control over your portfolio.

This podcast talks about how to deal with a bad 401(k) plan, short of leaving your employer. But, in essence, you have a few options:

  1. Invest in a couple of good options. You can invest your 401(k) funds in offered options that are good investments. Then, use your IRA or taxable investments to balance our your portfolio.
  2. Find reasonable investment options across the three major asset classes: international stocks, U.S. stocks, and bonds. They don’t have to be the best options, but this is a start.
  3. Use a target-date fund. These are often already diversified for you, and can be easier to manage. Be sure to double-check the fees, though, as these can be high.

Resource: Don’t Make the Same $100,000 Retirement Mistake I Did

These options give you a way to wisely invest the money that’s in your inflexible or expensive 401(k). But you can also use another trick to make the most of your tax-advantaged investments: use an IRA, as well.

Basically, you’ll want to invest enough in your 401(k) to get the full employer match. Then invest in an IRA until you max it out. If you hit the IRA contribution limit, you can then invest more in your 401(k). If you max that out, you’re a rockstar, and you can then move on to taxable investments.

This strategy lets you get all the free money that’s on the table. But you can then take most of your tax-advantaged investment money to a better investment vehicle.

10. Keep track of your wealth as you go.

Keeping an eye on your portfolio doesn’t have to take tons of time. If you sign up for a great tool, you can keep track of your total wealth as it grows. Tracking your net worth is a great way to stay on track with your financial goals.

There are loads of options for doing this. One is Personal Capital. It lets you hook up your investing accounts, and it’ll keep track of your portfolio’s performance. You can also hook it up to your various debt accounts, spending accounts, and more to keep track of your overall net worth.

Related: Tools of Titans: How the Most Successful People Got There

What if You Don’t Have a 401(k) Option?

So, what if you’ve got a freshly-minted college degree but no 401(k) in sight? Maybe you’re working for a tiny employer that doesn’t offer retirement benefits. Or maybe you’ve decided to work for yourself for a while.

All is not lost!

You can, of course, open an IRA and begin contributing to that out of your earnings. Not sure if you need a Roth or traditional IRA option? Check out this article for a rundown. If you’ve opened your own business, even as a freelancer, you have a wealth of retirement savings options available.

Most of these tips and tricks still apply. So, open the account that works for you, and start saving!

Article comments

Lance @ My Strategic Dollar says:

Great tips! I recommend focusing on fees. If you’re paying higher fees for your 401K than other investments, just put enough in to get the company match, then invest in something else.

Stephanie Colestock says:

Great advice, Lance! Balancing fees and matches is definitely a learned skill; the sooner new grads figure out how to maximize their earnings while minimizing their fees, the sooner they can make their money REALLY work for them.

Thanks for commenting!

Best, Stephanie