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[quote=Anonymous][quote=Anonymous]Hi all-
I just started a new position where I have a 401k option.  I've never had a 401k, so I wasn't totally sure how they worked.  I just got my paperwork in the mail with how and where to enroll.  
I was under the impression it was basically just an account where I send a percentage of my paycheck, and my employers matches 3%.  Bing bang boom.  However, in the paperwork it lists my options for the 401k-
- Domestic Equities (Spartan 500 index fund- Fidelity Advantage Class), JP Morgan Large Cap Growth Fund, T Rowe Price Mid-Cap Growth Fund Advisor Class.. and a few others)
- International / Glodbal Equity (American Funds EuroPacific Growth Fund Class R-4, T Row Price Emerging Markets Stock Fund)
- Specialty (Cohen& Steers Realty Shares Fund)
 and then Lifecycle Funds: all T Rowe Price - Target date 2000-2014, Target date 2015-2030, Target date 2031+

However.... I was under the impression that "LifeCycle" Funds were Roth IRA's.  I thought 401k's and IRA's were two separate things.  Yes, I know I can google this, and I am, but I still am not seeing it in black and white.

Any help?[/quote]

A 401k is basically an account where you (and hopefully your employer) invest part of your salary.  You get a tax break for investing in the 401(k), and in return there are a lot of limitations on how you can access your money, at least until retirement age.

However, a 401k is not like a passbook savings account.  Since you are investing for the longterm, you usually want to have 1/2, 3/4 or even more in the stock market, because historically while stock values go up and down, over the long term they have the best record.

If you really know nothing about stocks or investing, I would probably suggest picking the T Rowe Price lifecycle fund for the year when you expect to retire (rounding down if necessary) (and then suggest not really opening the account statements).  The lifecycle fund will keep you invested in a variety of stocks and bonds, and rebalance across the assets over time.

It is true also that the fees charged can eat into your returns.  The TRP funds should have fees of less than 1%.  Ideally you'd want fees under .5% or even .25% but sometimes under 1% is all you can do, and shopping solely on fees isn't a great idea unless you know the two funds are otherwise pretty identical.[/quote]

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