Retirement Program

• A 401k plan is tied to your employer. If you leave your job, you'll have to either cash out your 401k plan (which is subject to penalties and taxes) or you'll have to roll it over into a traditional IRA.
• Some programs have a waiting period. You may not be eligible to contribute to the plan for up to a year. You should open a traditional or Roth IRA in the mean time.
• Your employer's contributions may be subject to "vesting." This means that you don't actually own the contributions unless you remain at your job for a certain amount of time.
• In some cases, the matched funds vest over time. Each year, you own a greater portion of the matched funds. After a certain number of years you own 100% of the funds. In other cases you never have partial ownership of the funds. You own nothing until the term is up - then you get full ownership of the matched funds.
• If your plan vests over time, you should contribute to it even if you think you'll leave your employer within a few years. It may be less free money, but it's still money. If you need to put in a full five years before you own any of it and you think you'll leave before that, pass up the 401k and head for an IRA.
• Keep in mind you can decide not to participate in the company 401k plan after you have been automatically enrolled. 

Click here to go to the next topic, Automatic Escalation, to learn about increasing your retirement contributions over time.