Heather wrote in with a great question:

“I just became eligible for my employer’s 401(k). Should I participate? And how do I know how much I can afford to put in?”

If you're in the same boat—congrats! Getting access to a 401(k) is a big deal, and the short answer is: yes, you should absolutely participate if you can. Here’s why—and how to get started without freaking out.

What Is a 401(k), and Why Does It Matter?

A 401(k) is a retirement savings account sponsored by your employer. The biggest perks?Professional management: Your money is invested by professionals aiming to grow your savings over time.

Pre-tax contributions: Money goes into your 401(k) before taxes are taken out—lowering your taxable income now.

Tax-deferred growth: You don’t pay taxes on investment gains until you take the money out in retirement.

What If My Employer Offers a Match?

If your employer matches part of your contributions, take advantage! That’s free money added to your retirement account. Just know there may be a “vesting” schedule, meaning you must stay with the company for a specific time before keeping their portion.

But even if you leave, your contributions are yours. Your 401(k) is portable—you can take it with you or roll it into another retirement account later.

How Much Should I Contribute?

If you’re worried about your take-home pay shrinking, here’s some good news:
Most people can contribute 1–4% of their paycheck without noticing a big difference in their take—home pay because it’s pre-tax.

Start small. You can increase the amount later. Some plans even let you auto-escalate, so your contribution grows a little each year without having to think about it.

When I started my first 401(k) at age 25, I put in 2%—and it didn’t impact my paycheck like I feared. But what it did do was give me a sense of control. I wasn’t just surviving week to week—I was doing one small thing for my future self.

What If I’m Older?

If you’re 50 or over, you may be eligible for catch-up contributions that let you invest more each year. Talk to HR for the specifics of your plan.

Bottom Line:

Yes, contribute if you can.

Start small—1–4% is a great beginning.

Take advantage of employer matches.

Increase your contributions over time.

Don’t let confusing language stop you. Ask questions!

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