401(k): Sign Up Early

You cannot sign up early enough when it comes to a 401(k) plan. If your employer offers it, grab it, as it can contribute to financial stability later in life. People in their 20s and 30s can take advantage of it by investing small amounts of money into it and watching it grow into significant amounts. Start on it as early as you can in your career.

If your employer offers a 401(k) match, work with a Human Resources representative to help figure out how much you should contribute. If no 401(k) plan in on offer, consult a brokerage firm, bank, mutual fund company, or other financial institution and set up an IRA. Contribute the maximum every year, so you can yield the rewards later.

The good thing about starting early in life is that you can afford to invest in riskier stocks and bonds that can potentially pay off. It is always wise to allocate investments between different types of funds and sectors of the economy, rather than focusing on conservative funds only.

If you will be changing jobs or making a career change, be cautious of your moves. One of the most financially damaging things you can do is to cash out your 401(k) when you move on to another job. This will result in your paying taxes on the balance and paying a 10 percent tax penalty. By doing so, you would have diminished all the benefits of saving during the early stages of your career. Even if you change jobs, you may be allowed to leave your money in your employer's 401(k) plan. If this is not an option for you, a good idea is to roll it over into a special IRA or your new employer's plan.