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Don't just set and forget your 401(k). Consider creating a carefully coordinated plan for your investments, income and health care to help ensure your balance translates into lifelong financial security.
By
Cathy DeWitt Dunn, CDFA®, FRC®
published
25 March 2026
in Features
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If you've looked at your 401(k) lately, you may have been pleasantly surprised. After several years of market volatility, many retirement accounts are sitting at or near their highest levels.
In the fourth quarter of 2025, the average 401(k) balance jumped to $146,400, up 11.2% from the same quarter in 2024, an all-time high. The average IRA also rose, to $137,095.
This is great news for savers, especially younger generations struggling to pay for the now while trying to prioritize their future selves. This could be the perfect time to take a closer look at what's in your plan and consider whether your current strategy is setting you up for long-term success.
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Sign upFor those age 59½ and older, the stakes are even higher. While you're inching closer to retirement, there are still opportunities to realize gains while protecting what you've worked so hard to build. The key is to create a more strategic plan for retirement income.
The hidden cost of set-it-and-forget-it 401(k) plans
Outside those lucky enough to have a pension, 401(k)s are one of the most common ways workers save for retirement. They're easy to set up, can be automatic through payroll deduction and, in many cases, offer a matching contribution through your employer.
However, most people don't realize how much they're paying in administrative and investment fees. These rarely looked at fees can quietly eat away at your nest egg.
Even a small 401(k) fee of 0.5% to 1% can reduce your total retirement income by tens of thousands of dollars.
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Nearly all workers (98%) are enrolled in set-it-and-forget-it 401(k) plans such as target-date funds (TDFs) when they start a new job. These funds are a type of mutual fund that automatically shifts investments based on your age and retirement timeline, starting with riskier assets such as stocks and gradually moving toward more conservative assets such as bonds as you get older.
While these plans are low maintenance, they often fail to account for personal financial situations, are limited in their investment offerings and don't always coordinate well with other assets.
If you've built a sizable savings in your plan, now might be the time to take some of your "winnings" off the table and explore other investment options.
You have more options than you think
Once you reach age 59½, most employer plans allow you to transfer funds from your current 401(k) into an IRA through an in-service rollover.
While 401(k) rollovers typically happen when changing jobs, an in-service rollover allows you to do so without a job change. Moving money out of your 401(k) and into an IRA gives you more flexibility and control of your investments. Other benefits include:
- Added investment choices. IRAs offer access to a wide range of funds, ETFs and money managers.
- Customized strategies. You can tailor investments to your personal goals, risk tolerance and retirement timeline.
- Reduced costs. IRAs often have lower fees compared with 401(k)s.
Alternative 401(k) options
Once you move retirement funds into an IRA, other alternative investment options become available:
- Access to managed investment portfolios and money managers. Expert portfolio managers can offer you a more personalized investment strategy, giving you access to more diversified holdings and proactive risk management.
- Structured notes and short-term investments. These hybrid financial instruments, often seen as too risky or complicated for individual investors can help you balance growth opportunities with income protection. All structured notes have two underlying pieces, one part bond, the other part derivative, used to provide exposure to any asset class. The return is linked to the performance of an asset, group of assets or index. The wide variety of potential payoffs make them attractive and hard to find anywhere else.
- Modern annuities. Once given a bad rap for older, variable versions that exposed investors to market losses and high costs, today's fixed-indexed annuities have evolved and can offer principal protection, market-tied growth and the option for guaranteed lifetime income in retirement.
Don't forget the rest of your plan: Insurance, health care and long-term care
A comprehensive retirement strategy goes far beyond investment returns. Planning for long-term care and other medical expenses in retirement is essential.
Americans are living longer, so you have to factor in longevity risk, the financial burden of paying for living a longer life, as well. You may spend more time in retirement, sometimes 20 or 30 years or more, than you would have ever imagined.
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Health care is one of the largest and most unpredictable expenses in retirement. Many employers are seeing double-digit increases in group health plan premiums this year. It's a sobering reminder that medical expenses won't get cheaper in retirement.
Now may be a good time to consider taking a portion of your money and insuring or hedging against your future health care expenses by locking in better rates so they last the rest of your life.
- Life insurance with living benefits. Some life insurance policies allow you to access funds while you're still alive to cover long-term care or chronic illnesses.
- Dedicated long-term care coverage. Locking in long-term care insurance rates while you're still healthy can help protect your retirement savings.
- Hybrid policies. Combining life insurance and long-term care benefits can give you flexibility and coverage peace of mind, regardless of whether the care is needed. These hybrid policies help pay for qualified, in-home care or facility services, and if unused, provide a death benefit to beneficiaries.
Remember, you're as young and healthy as you'll ever be today. Taking proactive steps now can save you substantially later.
The power of a comprehensive plan
When you're young and just starting your career, retirement may seem like an afterthought, and for many people, it should be. But long-term financial success requires more than just a healthy 401(k) balance.
If you want to spend less time worrying about the market during your retirement years, rolling over your 401(k) can give you more control and open the door to strategies and tools to help you retire confidently.
There are always going to be challenges and hurdles in life, but taking the time to create a carefully coordinated plan for your investments, income and health care can help ensure that your record-high balances truly translate into lifelong financial security.
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- How to Make 2026 Your Best Year Yet for Retirement Savings
- The 401(k) Mistake That Could Cost You Millions in Retirement Savings
- Your 401(k) Options Just Got More Complicated: Here's What You Need to Know
- 4 Pro Tips for Successfully Scaling the Medicare Mountain
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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Cathy DeWitt Dunn, CDFA®, FRC®Social Links NavigationPresident and CEO, DeWitt & Dunn Financial ServicesWith more than 20 years of experience guiding clients through the complexities of retirement planning, Cathy DeWitt Dunn is a trusted financial expert and founder of her own successful firm. As a Certified Divorce Financial Analyst (CDFA®) and Federal Retirement Consultant (FRC®), Cathy brings specialized expertise to help women and federal employees navigate their financial futures with confidence.