You've started your new job, and the human resources director hands you a swamp of paperwork. Somewhere in the stack, you're likely to find information and enrollment forms for a 401(k) plan. Named for its section in the Internal Revenue Code, 401(k) plans first emerged in the early 1980s as alternatives to pension plans. Today, 401(k)s are primary investment vehicles in helping Americans save for retirement, with more than 65 million employees participating [source: Fetini]. But what should you do before you join their ranks?
We're going to look at five steps you need to take before enrolling in a 401(k) plan, from determining how much you'll be deducting from your paychecks to picking the right portfolio. To start, let's look at how 401(k) plans work.