Do I need to set up a 401k during the first year of my career or can I wait?

Just landed my first career job at a tech startup - yay! - and I need to fill out my new employee paper work. One thing I'm having a hard time figuring out is my 401k contribution. I'm on an entry-level salary and it's painful to think about contributing to a 401k right now and trying to make rent - ha. I know a 401k is so important, but I'm wondering if it's big deal if I wait a few years (or at least push this out until I'm making more money)?

Hey Kate! I wish I asked this 8 years ago & had a mentor to guide me through this question. Disclaimer: I'm not a financial advisor, nor a CPA, but I was once a new-grad starting my career in a entry-level position. I started saving for my 401(k) when I was 24yo & I'm now 5 years in...I wish I started earlier. I worked 2 jobs with large corps & I'm now 1yr into a 4yo start up. At each job, I was fortunate enough to have management that cared enough about their employees to offer direct & third party guidance on this topic, which I finally started taking advantage of. Here's the quick & dirty: (i) Consider your debts -- Do you have a lot credit card debt? If so, you MUST take care of that 1st & foremost. It's no fun & it slowly sucks the life out of you. It only gets worse with time. The high interest rates of credit will offset the benefits of saving. Start a payment plan directly towards paying off credit cards. Pay minimum on school loans, auto loans, etc., b/c those interest rates shouldn't be high enough to warrant delaying your retirement fund. (ii) There's always reasons to spend -- you're at a tech start up in San Francisco, so it's going to be very tempting to hit the endless bars & restaurants available to you Mon-Sun with your new influx of money. Your colleagues & friends all vary in age & how far along they are in their careers. Some will be hitting their stride in generating income & some may even hit it BIG! Don't worry about keeping up with everyone right out the gate. You're an entry level employee, so take advantage of company hosted happy hours, holiday events, etc. for your big nights out. Save your hard earned money for truly special occasions with family and friends. This is one of the perks of working for a successful tech start up. If you're at a bootstrapped company that's more conservative, then I promise your expanding network will also have events where you can take advantage of the freebies. (iii) Budget - Figure out what your known expenses are going to be (e.g. rent, utilities, insurance, phone) then set that aside. What’s left? Now create an immediately available savings fund - this is your "Rainy Day Fund" in case of an emergency -- you ARE at a START UP & not all start ups are rainbow blooded unicorns, no employee is invincible. I suggest saving 2-3 months of your fixed monthly output. (iv) Start investing - Talk to your HR team & get going on it right away. You're young & I assume not responsible for many other lives than your own, so feel free to get a little aggressive with your investments (they'll go over this with you). Some companies might match your investment up to some %. If yours does, TAKE ADVANTAGE OF THIS! PUT IN AS MUCH AS YOU CAN AFFORD. You aren't ever locked into the amount, so if you're feeling too strapped for cash every month, you can always dial it back. I know this was long winded, but its learnings I feel compelled to share. Feel free to reach out any time and best of luck to you!

If I could give you 10 upvotes, I would. This is the answer.

One more thing to add: I, too, did not start investing in my 401k until a bit later. I was making $42k at my first job in NYC and wanted to use all of it to pay for my rent and then go out and take part in the amazing nightlife. Unfortunately, what I realize now is that the best time to start investing in your 401k is...AS EARLY AS POSSIBLE. I missed out on my company's 401k match, which meant I was leaving money on the table, and I put myself in a position where I could have a nest egg of almost $100k with all that sweet compound interest.

And, compound interest is a really tough concept to grasp, but here's a link that breaks down a few 401k scenarios, and it really illustrates how important it is for you to start as early as you can:

If you need anything, hit me back with a reply!

This is really helpful - thank you for responding to me!!! It's still a little daunting and confusing though. I looked back at the paper work - the company doesn't offer a match. I'm fortunate not to have any credit card debt to contend with, but I crunched the numbers and I really can only contribute 2 or 3 percent to my 401k. Is that even worth it? I basically won't retire until I'm 200 at this contribution level :-)

Definitely. You're already ahead of your peers with no CC debt. I recommend getting started with whatever you can and to get in the habit of re-evaluating how much you can contribute with each promotion/raise/new job. If you're thinking about this already, you have a good head on your shoulders, so I have confidence that those promotions and raises will come fast. A little bit now compounds over time. 5 years is going to fly by and you'll regret not having started when you could have. It's going to feel good!