Step 1: Get the facts

If working for a company that offers automatic enrollment, the employer will typically enroll an employee once they meet the retirement plan's eligibility requirements, and will begin to direct a certain percentage of their paycheck (the contribution rate) into the investment fund the company has chosen as its default.

Employees shouldn't make the mistake of thinking they have to stick with the default elections their employer has chosen for them. Once automatically enrolled, an employee can increase (or decrease) their contribution rate, move money from one investment option to another, or even opt out of the plan altogether. They may even have the right in some cases to request a refund of amounts automatically withheld from their pay.

An employer is required to send information about the plan provisions and investment options, along with specific instructions on how to opt out if an employee chooses not to participate in the plan. Read all documents (including the plan statements), and ask questions about anything that's not understood before making any investment decisions.

Step 2: Consider the contribution rate

Many people may be tempted to stick with the contribution rate their employer has chosen for them. But this contribution rate (typically 3 percent) may be less than they need to contribute to target their retirement savings goal. Find out, too, if an employer offers matching funds (employers who offer matching funds to traditionally-enrolled plan participants must offer the same match to automatically-enrolled participants). If so, try to contribute at least enough to receive the full match. (401(k) plans with qualified automatic contribution arrangements (QACAs) are required to make a contribution on an employee's behalf.)

Step 3: Review the investment options

When automatically enrolled, contributions are invested in the plan's default investment option (typically a fund that includes a balanced mix of investments). But investing in the default option may not be the best choice. Depending on how much is needed to save for retirement, how far away someone is from retirement, and their tolerance for risk, they may want to redirect some of their contributions into more aggressive options that, although more volatile, offer greater potential for long-term growth.

Step 4: Check up on the plan at least once a year

Even if an employee decides to stick with their company's default options for now, they should review their investment options at least once a year, keeping in mind the following questions:

• Are they saving enough?
• Can they afford to contribute more?
• Are the investments they've chosen still appropriate for their age and risk tolerance?
• Do they need to redirect all or some of their contributions to better target their retirement savings goal?

When making decisions, think about an overall retirement plan, including where retirement money will come from (e.g., Social Security, 401(k) plan, pension plan), the major expenses that may need to be met (e.g., housing, medical care), and the lifestyle one hopes to lead (e.g., traveling frequently, owning a second home).