- Choice of investments: Generally, in a 401(k) or similar plan, you have a choice of investments, ranging from conservative to aggressive. Many plans offer target date funds, which you might peg to your expected retirement date.2 Typically, these funds comprise a mix of stock and bond funds designed to gradually reduce your investment risk as you approach retirement.
- Vesting: The vested balance is the amount in your account that belongs to you. You will always own the money you put into your 401(k); however, its value could go up or down, since investing comes with risks. The employer match—or other contributions like profit sharing—if any, and any earnings on the match aren’t entirely yours until you’ve worked at the company for a certain number of years, known as the plan’s vesting period. Once you’ve met the plan’s vesting requirements, the company’s contributions—and any future matches—are yours to keep.
If you leave your job, the vested balance remains yours. You may generally choose to roll it into a traditional or Roth IRA or your new employer’s plan (if your new employer’s plan permits), take a distribution or leave the account where it is.3 Read more about these choices at Merrill Edge. Your HR representative or a financial advisor can be a good resource to answer any questions you may have.
If you can contribute to an employer-sponsored plan, starting early can make a big difference. Consider what could happen if you start saving with your first job: