When you participate in the plan, money is automatically deducted from every paycheck. If you make pre-tax contributions, the money you save—and what it earns over the years—isn’t taxed until you withdraw it.

You will owe income taxes on your withdrawals, ideally in retirement. However, if you make withdrawals before age 59½, you could also owe an additional 10% federal penalty unless you meet one of several exceptions.

After enrolling in your employer’s retirement plan, follow the four steps below to prepare for a comfortable retirement.

  1. Save enough to get the full match. Vanguard recommends that you try to save 12% to 15% a year, including any employer match, for retirement.

    If that’s too much right now, save at least enough to get any employer match, which is free money employers add to your account to reward you for saving.
  2. Raise your savings automatically, if you can. Many plans allow you to automatically increase your plan contributions. If eligible, you might want to increase your savings rate by one percentage point annually.

    Set the increase to take effect when you expect an annual raise or bonus. That way you might not even feel a change in your take-home pay.
  3. Own a diversified portfolio. Choosing your asset mix—the selection of stocks, bonds, and cash in your portfolio—is one of the most important investing decisions you’ll make. Your asset mix should align with your goals, time frame, and risk tolerance. The more bonds and stocks you own, the smaller the impact each one individually can have on your overall portfolio, which lowers your risk through diversification.

    Most employer retirement plans offer all-in-one funds, which hold a broad selection of stock and bond funds in a single fund. These funds make it easy to maintain a broadly diversified portfolio.
  4. Don’t cash out. If you change jobs, preserve the dollars you’ve saved. You can do this by rolling them directly into your new employer’s retirement plan or by rolling your money into an IRA.

    Just don’t cash out and pocket the money. If you do, taxes and penalties could deplete your savings to the extent that you’d need to start saving for retirement from scratch—again.

All investing is subject to risk, including the possible loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments.