Otherwise, youre simply missing out on freemoneyyou could accumulate in compound interest and employer contributions.
Turns out like most things involving your finances its not totally cut-and-dry.
Retirement planning is complicated, and many people just dont have the tools to navigate it.
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Fortunately, some people do.
Which questions should you ask?
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When are You Eligible to Join?
If you cant start contributing immediately, you’ve got the option to still save for retirement.
Collinson recommends opening an IRA or starting with the more short-term myRA to get started.
The other thing it’s possible for you to do is just save on your own, she said.
Save the same percentage in a regular savings account or IRA.
The key is to get into the habit of saving.
Does Your Employer Match?
Employers may match a percentage of each paycheck you choose to contribute but with a limit.
ensure you know how much your employer will match and for how long, Janis notes.
Will You Be Enrolled Automatically?
If youll be auto-enrolled, find out the default contribution rate.
Auto-enrollment is certainly a convenient option, so dont let it deter you.
While were talking about homework… do the math to determine the right contribution rate for you.
Can You Rollover From an Existing 401(K)?
This tends to be the best course of action, Collinson explained.
But even the rollover comes with variables, and you should know what they are.
Many plans include the ability to automatically cash out balances under $5,000 of terminated employees, Collinson said.
That could mean losing more than one-fifth of your savings.
Acting early can help you avoid cashing out.
Is Your Bank Holding You Back?
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What Fees Are You Paying?
But just like interest compounds, so do fees.
Lee said your fees shouldnt amount to more than about 1% of your investment.
Your fees might not be obvious, so dont be afraid to ask.
What if your fees are out of whack?
6. Who Provides Your Plan?
Your 401(k) fees might be high simply because of ignorance.
Lack of research or resources could land you and your co-workers in a lousy plan.
However, your fees might also be outrageous because your employer is consideringtheirbest interests over yours.
Be suspicious of 401(k)s that are provided through banks, Toumayants warns.
Banks will target employers they have a lending relationship with, he explained.
Where is Your Money Invested?
But this information can be valuable and it could actually cost or save you money.
Professionally-managed funds come with higher fees because a professional is, in fact, actively managing them.
It helps prevent paralysis by analysis having too many options to ever make a choice.
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8. Who Can Answer Your Questions?
Its important that you find out who the plan custodian is, Janis said.
This is the person you will communicate with every month and/or year.
This is the representative with your retirement plan provider who can help you understand your plan.
They are not a personal financial planner, though, so dont expect investment advice.
Youcanask the plan custodian:
For investment advice and personalized financial planning, youll need to hire a fiduciary.
What Can You Do if Your Plan Sucks?
Toumayants suggests first talking with your employer.
Their retirement money is in that account, too.
They probably want the best plan as much as you do.
Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder.
