What I learned about my 401(k): A 20-something's guide

katie lobosco 401k
Katie Lobosco is on her way to a dream retirement.

When CNNMoney hired me, coworkers kept asking: "You enrolled in your 401(k), right?"

Sure I did. But it took me a year to get started. And it wasn't until I moved over to our newsroom's retirement beat that I actually logged into my account to find out exactly where my money was going.

It can be intimidating to take a look without doing a little research first. So I did the legwork for you. Here's what every 20-something should know about their 401(k).

Don't throw away money.

A lot of employers will match what you save in your 401(k), up to a certain amount. Mine does, but for the first year, I didn't contribute enough to get the full match. Why would I voluntarily kiss goodbye a bigger chunk of my paycheck while I'm still paying off a student loan and paying expensive New York City rent?

Because I ended up cheating myself out of $23,992.

I was throwing away money by NOT contributing more to my 401(k). If I had put away an additional $142 a month, CNN would have added another $1,704 over a year. I basically rejected that free money when I chose to leave my contribution amount at the default level of 3% of my income.

That extra savings from me and my employer alone could have grown to $23,992 by the time I'm 67 years old, assuming an average annual rate of return of 5%.

So find out how much of your income your company will match. The answer is probably buried in that stack of paper you were handed in orientation. But a quick call to your HR rep is your best bet.

Set up automatic increases.

Experts at Fidelity suggest saving enough so that your contribution to the 401(k), plus your company's, add up to a total of 15% of your annual income. But if you don't feel comfortable saving that much just yet, most retirement plans let you set up automatic increases. I went online (yup, you don't even have to talk to anyone!) to increase my contribution by 1% each year. It took about 60 seconds. If you set it around the same time as an annual salary increase, you probably won't even notice the difference.

If I change my mind, I can remove the automatic increase at any time and without incurring any charges.

Don't be afraid of stocks.

Some of the money you put into a 401(k) should be in stocks and some should be in bonds. And according to experts, 20-somethings should be more heavily invested in the former.

Now, those of us that graduated from college at the height of the recession aren't super excited about putting money into the stock market. But, I have 40 years to go before retirement. Now's the time to take on some risk.

With the click of a few buttons, I moved my investments into a fund that puts about 77% in stocks and the rest in bonds -- one of the most risky options offered in my plan. When retirement gets closer, I'll move more of my money into more conservative investments.

Your plan might offer what's called a "target date fund," which will move your assets into more bonds for you as you get older. At Fidelity, about 58% of Millennials have all of their 401(k) investments in this kind of fund.

Know what it's costing you.

Just like any other 401(k) plan, Fidelity charges a small annual administrative fee. I paid about $9 last year. Your fee should be posted in your account statement.

There are also investment fees that vary depending on what funds you invest in. You may not see it in your statement because it's deducted directly from your investments. After about 10 minutes of looking online I still wasn't sure how much I was being charged, so I called the 1-800 number. Within seconds I was connected with someone who explained that once a year, I pay $3.17 for every $1,000 invested for the particular fund I'm invested in. That's a little lower than the average 401(k) fund, which is about $5.80 for every $1,000 invested, according to BrightScope.

Think before you quit.

At most jobs, you'll lose the matching contribution from your employer if you leave the company too soon, before what's called the "vesting" date. It might not keep you at a stepping-stone job for too long, but it's good to know.

"Maybe it's worth staying another month to get the full bucket," said Meghan Murphy, a director at Fidelity.

At CNN, I'd lose my employer contributions if I left before the end of two years, but would still keep anything I contributed myself.

Half of Millennials job-hop before fully vested, leaving behind an average of $1,400, according to Fidelity.

If you do go, don't take your money out of that 401(k). It will cost you. Withdrawing the money before the age of 59 1/2 will trigger a penalty of 10%, plus you'll have to pay regular income tax on the entire amount. Instead, you can roll it over into an IRA or the 401(k) plan offered by your new employer by making a phone call to your plan provider. And most companies let you keep your money in the old 401(k) fund where it will keep growing even though you can't add to it anymore.

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