It is no secret that the economy is a little unpredictable right now. With changing markets in a changing world, it is important that everyone prepare for the future and retirement—even if it still seems like light-years away.

For many of us, it is possible that our parents worked at one company for their whole career and may have a pension as a result. For most millennials, that won’t be the case. Pensions are quickly going away and it is important that you prepare your own pension or retirement funds so you are taken care of when the time comes. One of the ways to do that is by investing in a 401(k). 

What to Look For

When you evaluate job offers, it is important to look at the whole package and not just the salary they are offering to you.  You of course want to look at salary, vacation and sick time, work environment, and things that will affect your day-to-day happiness, but you also want to look at what they offer in terms of a 401(k).

Here are five questions to ask your employer when it comes to evaluating your options.

1. Do you offer a 401(k)?

If one company is offering you a salary of $45,000 with a 401(k) and the other company is offering you $50,000 but does not offer a 401(k), the first offer may actually be more lucrative in the end. Remember to consider all factors.

2. When am I eligible to start contributing?

​Some companies have a waiting period before you are eligible for this benefit (often 90 days but it can vary).  The earlier you can contribute the better so that you can start earning that extra money.

3. Is there a match?

“Match” refers to how much money your company will match of your contribution (usually it is a percentage). Some companies contribute to your 401(k) without you having to contribute anything—which is even better because it means you don’t have to commit to putting in a certain amount.

4. What is the match?

Some companies will match three percent, for example. This means if you contribute three percent of your paycheck into your 401(k) retirement account then your company will do the same. If that three percent turns out to equal $50 then the company will put in $50 as well. Now, you have $100!

5. What does the vesting schedule look like? 

In the event that you leave the company, you are always entitled to the full amount that you put in to your account. Using the above example, you would be entitled to your $50. However, some companies use a vesting schedule to determine how much of their portion you are also. Often is it something like this:

• 0-1 years of employment = 20%
• 1-2 years of employment = 40%
• 2-3 years of employment = 60%
• 3-4 years of employment = 80%
• 4+ years of employment = 100%

Therefore, if you had contributed a total of $2,000 into your account and the company had matched that $2,000, you would have a total of $4,000. If you left after 1.5 years, you would be entitled to your full $2,000 that you put in and 40% of the $2,000 that they put in (which comes out to $800). That leaves you with $2,800 in your retirement account. For this reason, it is always important to think about how long you can see yourself staying in your job, and how it will affect your 401(k) savings.

Ultimately, don’t fret over how much you save! Small contributions from each paycheck will add up quickly. By thoughtfully evaluating your 401(k) options, you can put a generous amount of money away for future use.   

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