Series · Lesson 7

Make the 401(k) Work for You

Capture the match, understand vesting, and choose investments you can maintain.

Key Principle

The employer retirement plan is often the easiest place to start building retirement wealth.

What You Need to Know

• Determine the match formula.
• Understand vesting.
• Review Traditional and Roth options.
• Review investment choices and fees.
• Understand contribution limits and plan rules each year.

What You Should Do

• Contribute enough to capture the full match when practical.
• Increase contributions after raises.
• Use automatic escalation when available.
• Choose a diversified investment option appropriate to the time horizon.

Common Mistakes

• Leaving the match unused.
• Choosing investments based only on last year's performance.
• Ignoring plan fees.
• Stopping contributions during market declines.

Advisor’s Perspective

The plan should be reviewed as part of the whole household portfolio, not in isolation.

Action Checklist

• Match identified
• Vesting understood
• Contribution set
• Investment selected
• Fees reviewed
• Annual increase scheduled

Related reading: Understanding Retirement Accounts

This is Lesson 7 of the Your First Paycheck Education Series. Continue with Lesson 8: Roth vs. Traditional.

← Lesson 6 · Lesson 8 →