Money Watch: Making the most of 401(k) plans

• Contact your benefits department to learn how your 401(k) works
• Auto enrollment is convenient, but contributions are often conservative
• Most important factor: Save as much as you can on a regular basis

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com.

Q: I can participate in my company 401(k) plan but honestly I don't know how it works. And how can I make the most of it?

A: Contact your benefits department and find out how to have money deferred from your paycheck into the plan. A growing number of companies automatically enroll employees in their 401(k) plan, although workers can opt out if they do not want to participate.

Auto enrollment makes it very easy to start saving for retirement. But it tends to start out with a low default contribution rate, often 3% of salary. And because auto-enrolled workers may become complacent, some employers are starting to include auto escalation, which gradually increases the contribution rate.

But it seems you may have to make an effort to enroll in your plan and carefully make the contribution rate and investment decisions on your own. Among the things to consider:

Does your employer offer a match on some or all of your contribution? If so, you will want to ensure that you contribute at least enough to get the maximum matching contribution from the company.

As an example, a company might match 50% of your contributions up to 6% of salary. If you are able, you would want to contribute at least 6% to receive the full match. This is free money.

You will need to carefully consider the investment options available to you. Most 401(k) plans offer asset allocation mutual funds, which have a mix of stocks, bonds, and cash. Your choice should be related to your risk tolerance and how many years you have left before retirement. And if you have other investments you will want to take those into account in making this decision.

Many plans also provide target date funds, which are mutual funds that are professionally managed and allocated using the target date on the fund as your projected retirement date. As time goes on, the investment allocations are gradually switched from stocks to bonds and cash.

These can be a good option if you are uncomfortable allocating your own investments. But target date mutual funds vary widely, with different fees, structures and holdings.

Some plans offer investment advice to participants as well. This advice might be free or carry some cost. If you have a financial planner ask him or her to assist with this, again they will likely charge you for their advice. But don't just rely on advice from "around the water cooler" because what may be right for your co-workers may not be right for you.

Starting this year, 401(k) plans have to provide you with an annual statement about the investment options, including both performance and fees. And the return on investments must include their historical performance, as well as a benchmark, so that an S&P 500 index fund, for example, could be compared with the S&P 500 stock index. That can help you make the best investment choices.

But the most important factor is to save as much as you can on a regular basis. While the investments chosen are important, most studies that I've seen indicate that the biggest factor in retirement savings success is the amount saved -- so start early and keep with it.