A couple of months ago, I wrote about some tips for retirement.  The truth is, even if you only just entered the workforce, there’s no time too early to start saving.  One of the best ways to do this is through a 401(k).  If you’re looking at your first job out of college, here are a few simple steps, taken from a post I read on the Vanguard blog:

Consider a target-date fund: Investment strategies with target-date funds typically offer low costs, a globally diversified asset allocation, and rebalancing, all combined together.  If you find yourself selecting a retirement plan option, think about a target-date fund with the year in which you roughly estimate you’ll retire (typical age, for reference, is 65).  Your asset allocation will then be allocated to stocks, and will adjust over time to become more conservative as the age of retirement gets closer.

Consider a Roth: With a traditional 401(k) contributions, you put in money before taxes, but you end up having to pay the taxes when you withdraw the money.  Roth 401(k) contributions, on the other hand, are made with after-tax money, and you’ll get a break later.  In your early career, you’re going to be making less money than in the future, so a tax deduction on the present’s traditional tax-deferred account contributions will be far outweighed by a Roth account’s tax-free growth.  

Consider starting now: In an ideal world, target at least a 12-15% savings for retirement.  That might seem like a lot when you’re in your early 20s, but you’ll be happier in the long run.  While many people in their early 20s have plenty of expenses that will quickly eat up their meager paychecks, the more you save toward your retirement now, the better.  Focus on what you can control: pick low-cost, diversified investments coupled with a disciplined savings strategy.  You’ll soon find that you can meet your long-term investing goals while also balancing your short-term necessities.