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Step 1: Contribute the match
If your employer offers a 401(k) plan and matches your contributions, contribute to the plan at least as much as you need to reach the maximum matching amount. If you can afford it, contribute past the matching amount up to the maximum allowable contribution.
Step 2: Trim investments in employer stock
The next step is to make sure your retirement savings don’t vanish suddenly. If you are investing through a 401(k) or Individual Retirement Account (IRA) in your employer’s stock, transfer some of the employer stock investment to other assets so that the value of the employer stock you own is no more than 10 percent of your investments.
Step 3: Roll over after you leave
If you stop working for your employer for any reason, and if the pension plan permits you to take money out, do so and “roll the money over” into an IRA. There are three powerful reasons to do this: employee mobility, company stability and control over your investments
Step 4: Diversify your investments
Don’t invest all of your IRA and 401(k) money in one type of investment, such as stocks. Put some in bonds. And make sure your stock and bond investments are, in turn, broadly diversified among different types of stocks and bonds. If you follow steps 1 to 3, you’ll be doing a significant amount of investing on your own. As you do, you should follow the most basic of investing principles: diversification. Invest in different types of assets, so that if one type disappoints, your entire retirement income doesn’t suffer to the same degree.
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