First Job

Employer-Sponsored Plans. Upon starting a first job, or any new job, check to see if your employer offers a defined contribution retirement plan, such as a 401(k) or 403(b) plan. Some employers automatically enroll new employees in such plans. But usually, you need to take the first step and enroll yourself.

Focus on Fees. You may have a choice of mutual funds, including index funds and target date funds. Fees and expenses vary from product to product and can take a huge bite out of your returns. Even small differences in investment costs can translate into large differences in returns over time. This can have an especially big impact when your investment goal is saving for retirement.

Save on Autopilot.  When you sign up, you’ll need to choose the amount you wish to contribute from each paycheck, and where you want the money invested. You can increase retirement savings by getting into the habit of paying yourself first with these automatic payments.

Take Advantage of Company Matching. Often, there’s “free money” involved. Your employer may contribute a certain amount to your retirement savings plan and match contributions that you make up to a certain level. If, for instance, an employer contributes 50 cents for every dollar you save, that’s an immediate 50% return. There is no other investment that will give you that kind of guaranteed return – don’t pass it up.

Pension Plans. Some employers may also offer traditional defined benefit pension plans. In this type of plan, the employer contributes the money, invests it, and pays a benefit to retirees based on their pay and the number of years they worked for the employer.

Individual Retirement Accounts (IRAs). Whether or not your employer has a retirement savings plan, you can start saving with an Individual Retirement Account, or IRA. There are traditional and Roth IRAs, which offer different tax advantages. There are income limits on who can contribute to an IRA, annual contribution limits and limits to what may be deducted for tax purposes.

Keep in mind. You can start an account with a relatively small amount and increase contributions later when your earnings increase and you have more to save. Starting early is key to saving enough for retirement. The younger you are when you begin saving, the more time your investments have to grow. When you change jobs or think you need some extra cash, try to avoid the need to cash out these accounts and spend the money. Instead, consult with a tax advisor to see if transferring plans makes sense. Your new plan may have lower fees, which could increase your investment return.