My company will soon be sending me information about their 401K program. I plan in investing in it, but I'll also have to choose from about 20 different mutual funds. Obviously I don't want to put everything in one, but what do I need to look for to choose the top 5 that would be best for me?

No one can give you a good (safe) answer until you state your objective(s)....In other words, what is your time line, your risk tolerance, and your desired result...

So, are you telling me I should look at the risk and how much it paid in the past?

I'm telling you the amount of risk you can tolerate is a determining factor when choosing funds...

Leigh is right, in the end it is all about the
risk you feel you can tolerate based on your
time left to add to the fund.
In the end, it really does get simple, you meld
those 2 together and they will just pop out at you.

Also, the history of the fund, did it meet its
stated goals in the time frame it allotted, what
are the FEES associated with it, sometimes they
can actually eat up all the profits, sometimes
their fees to MOVE in or out of a fund can be
really high, the FEES they charge to manage can also.

You can start with a simple chart, by RISK, TIME,
FEES and HISTORY.
And read all the fine print :-)

Hi Soufie Fees are not a consideration for him right now because he is investing (probably obligated) in his company's 401 plan and will be limited to the fund choices provided by same...I think he said there are 20...Company plans are usually no load in or out because employees are contributing "pretax" dollars and investment firms rely on steep federal penalties to discourage early withdrawal...

Frankly investing like that is a fools game. if you are going to invest like that leave your bank and head straight for a credit union. And do the smart thing, do your homework and ask a lot of questions of the folks supplying the fund. My brother has been putting money into several and most of them are BACKWARDS! I just hope for him his investment does not run away from him when he retires. But thankfully he is banking with a Credit Union and they appear to have his back. Not like any of the banks either of us dealt with.

It is for a 401K. Which everyone says is a good deal. But, my company only matches half of the first 3%. I'm wondering if I should invest in an IRA instead. I should probably talk to a good, fee based financial planner.

An IRA locks it away, you can't touch it until your 60 at least, however it has advantages as far as taxes go. Mutual Funds can be how part of an IRA is invested as well, so you'd be getting both in that case.

If you're going with the IRA definitely talk to someone about the differences between a Roth IRA and a traditional IRA.

Maybe you should talk to a professional financial investment planner.....Getting a lot of conflicting or erroneous info on here might make it even more confusing for you and investing for your future is a very important step...I will tell you straight out that ANY matching is a good thing as fewer and fewer companies are able to do so these days...Matching half of the first 3% is excellent and you would be foolish not to take advantage of it since it's a gimme ...Example: If you contribute 3% of $50,000 or $1,500.00 each year, your company will "give" you another $750.00 making your total contribution for the year $2,250.00....Also, since this money is pretax, the $1,500.00 will come off the top of your taxable income at year end...If you are paying 20% in federal tax, you will save an additional $300.00 in your federal income tax obligation....Talking to a "fee based" financial planner is not necessary as the info they provide will not be any different than that of a no load firm...There are many investment firms out there that are no load and have no exit fees or have "time sensitive" exit fees that decrease over time until they exhaust (usually 5 years)....Trust me, any one of them will be more than happy to help you!...Since the crash in late '08, they're all fighting for investors....

As for the differences between Roth IRA's and traditional IRA's, here is a short, concise explanation that should help...

The main difference is when you pay income taxes on the money you put in the plans. With a traditional IRA, you pay the taxes on the back end - that is, when you withdraw the money in retirement. But, in some cases, you may escape taxes on the front end - when you put the money into the account.
With a Roth IRA, it's the exact opposite. You pay the taxes on the front end, but there are no taxes on the back end.
And remember, in both traditional and Roth IRAs, your money grows tax free while it's in the account.
There are other differences too. While almost anyone with earned income can contribute to a traditional IRA, there are income limits for contributing to a Roth IRA. So not everyone can take advantage of them.
Roth IRAs are more flexible if you need to withdraw some of the money early.
With a Roth IRA, you can leave the money in for as long as you want, letting it grow and grow as you get older and older. With a traditional IRA, by contrast, you must start withdrawing the money by the time you reach age 70½.

http://money.cnn.com/retirement/guide/IRA_Basics.moneymag/index2.htm

Good luck to you!!!

talk to somebody with the firm where your 401K is being invested.

First of all, yes do put at least the 3% company match dollars into
your 401. The money they match is free money.

Second, funds in your company plan are usually listed by risk.
Bonds being the lowest risk but also the lowest return.

Read the paperwork the company gives you. It will usually give you a percentage based on your age, your investment goals, and your risk tolerance. Look for a balanced approach, a percentage in high risk or growth, a percentage in mid risk, and a percentage in low risk bonds.

I did speak to someone from my company. The impression I got was that the company matches only the first 3% of what I invest and anything above that is not matched.

So, if I invested $10,000, 3% of that is $300. The company would pay me just $150. Or if I put in $20,000 they'd add $300. Of course, it is free money and there's no taxes on it. Plus I'd get the interest from the mutual fund to boot.

I was self employed for so long. I just never looked into 401K programs.

Thanks everyone for the input.

No, you got it wrong...If you invest 3% of gross earnings, your company will contribute 1.5% of gross earnings...If you earn 50,000 per year and you invest 3% or 1500.00, you company will contribute 1.5% or 750.00....The percentage they match is based on the amount of gross earnings, not the amount you contribute to your plan...

I don't think that's what he said, but I'll have a look at the information pack he sent when I get home in a couple of weeks.

If you're right, that's a very good deal.

Retired corporate comptroller...Contributing and employer matching is always based on gross earnings...You are very fortunate to be working for a company that has a 401K matching plan...Do you remember what the contribution limit is?...At you age, if you can afford to, you should contribute the maximum allowed...And remember, it is "pretax" dollars so, counting what your employer contributes, you are saving in three ways...Plus, any money you earn on your investment will not be taxed until you withdraw...

Be grateful you have Leigh here who understands this stuff. I'd forgotten it but her posts are accurate, I remember when I read her posts.

I believe the max I can put in is $17,500 a year. I can do it as a set dollar amount each week or I can go with a percentage of my pay. Since my paycheck varies from week to week (sometimes vastly, I'm paid by the mile) I'm going to go with a percentage. Although, it's going to be hard to figure out what percent. I can't start until March 1st. So hopefully I'll have a couple of thousand more put away in case I go too high at first.

Also, I think I'm due for a two cent per mile raise in May. That may not sound like much, but I try to drive between 400 and 600 miles a day, seven days a week. Some weeks are just slow for freight though.

Sounds like you're serious about starting a solid plan for retirement....You will be amazed, pleasantly surprised, at how fast your money will grow...Again, much good luck! :)