I recommend contributing at least 3% or $100 per payroll or enough to get employer match to a 401k Roth. Why a 401K Roth? You do not know if your income tax bracket will increase or decrease by the time you retire, therefore, it is better to pay taxes now. A 401k Roth is not the same as a Roth IRA. With a Roth IRA you can withdraw your contributions any time without taxes or fees, however, earnings on your contribution cannot be withdrawn until you are 59 and half years of age.
Unlike the Roth IRA, you cannot withdraw contributions you make to a 401K Roth. If you decide to withdraw from a 401K Roth this would be considered a hardship withdrawal which comes with a 10% tax penalty if you’re not at least 59 ½ years of age and would require you to pay income taxes on it. There is a loophole for avoiding the 10% penalty tax which is taking a loan from this account with at least 5 years to pay it back unless the loan was for a down payment on a home then you have 15 years to pay it back. However, I do not recommend taking a loan from your retirement account.
Let us take this following example for managing multiple 401Ks from past jobs. Sade has two old 401Ks from past jobs ($2K and $35K). What should she do with these? First, never cash them out because you will have to pay income taxes and be required to pay a 10% penalty. The wise option is to do an IRA Rollover which Sade can set up at brokerage firms like TD Ameritrade or Fidelity. This allows Sade to transfer those 401k balances into an IRA account. By doing this Sade avoids taxes and penalties.