It's an unfortunate truth of retirement planning: Many Americans will not have a guaranteed pension to rely on in their golden years. For most of us, a 401(k) will be our primary tool for saving for retirement. That means the onus is on each of us to set aside enough money each year to fund our long-term goals.

And it's not always a pretty picture. Media accounts abound with tales of folks working into their 60s and 70s, retirees having to cut back on expenses, and huge swaths of the population being totally unprepared for retirement. But fortunately, not all of the news in 401(k)-land is bad.

Reaching new highs
Fidelity Investments recently announced that the average 401(k) account reached a 10-year high as of the end of 2010. According to their numbers, the average account balance rose to $71,500, up from $54,700 at the end of 2000. But the long-term effects were even more striking for investors who have been consistent savers for many years. Those 401(k) plan participants who were continuously active for the past 10 years had an average balance of $183,100! Fidelity states that plan participants deferred roughly 8.2% of their salary into 401(k) plans last year, similar to their contribution levels in recent years.

While it is certainly reassuring to see investors socking away more money for retirement, there is still a ways to go before 401(k) investing catches up to where it should be. It's nice to see the average account balance increase in the past 10 years, but the average numbers Fidelity quotes show only about a 30% gain in the average account balance. That's definitely moving in the right direction, but that's also not a whole lot over the span of a decade. An account balance of $71,500 isn't going to go too far in providing a comfortable retirement for most folks, so there's more ground to cover for those of us who will be relying on our 401(k) for our primary retirement vehicle.

Save until it hurts
You've surely heard this advice dozens, if not hundreds, of times before, but there really is only one way to ensure you can have an adequate retirement: you've got to save early and save often. According to the Fidelity study, the average 401(k) investor is saving just over 8% of his or her salary. That's an excellent start, but a figure closer to 10%-15% is probably necessary to amass the savings needed to fund a long retirement at your current standard of living. So try to crank up your savings to meet those targets. Saving isn't easy, but it's either cut back now or cut back during retirement.

When it comes to investing in your 401(k) or other like-minded plan, one of the first things you should do before identifying the hot-looking funds you want to invest in is create an appropriate asset allocation. That means you should be invested across a range of asset classes, including domestic large-cap and small-cap funds, foreign developed and emerging markets, and bonds. Even if you're not sure how exactly you should allocate your assets, as a starting point, you should spread your bets across multiple asset classes. If you've got a few decades to go before retirement, you could probably dedicate 90% of your assets to stocks. If you're already in retirement, you may want to cut stocks back to 40%-45% of your portfolio. Folks in between those points should adjust their equity allocation accordingly, depending on where they are in their investing journey.

And make sure you don't commit one of the biggest mistakes in 401(k) investing: allocating a large chunk of your assets to your company's stock. You've already got a lot riding on your company's future prospects, namely your job, so don't add to that risk by further hitching your portfolio's success to your employer's stock.

Location, location, location
While saving is your primary tool for building a solid retirement, you can't get to the goal line through saving alone. You need the compounding power of good investments to really make your portfolio grow. Since money within a 401(k) plan grows tax-deferred, this is a good place to own higher-turnover stock funds, dividend-producing funds, and bond funds. Since these types of funds throw off more taxable events in the form of capital gains from frequent selling or from dividend or interest payments, owning these types of funds in a 401(k) plan is usually a smart move.

If your mutual fund tends to turn its portfolio over fairly frequently and has annual turnover in excess of 100% or 150%, you might want to make sure you own this fund in a tax-advantaged account like a 401(k). The same advice applies if you can access exchange-traded funds in your plan. Whereas the SPDR S&P 500 ETF (NYSE: SPY) has a low 7% annual turnover, the Wilshire Micro-Cap ETF (NYSE: WMCR) comes with a turbo-charged 191% turnover ratio. If you own a fund like the latter, it may make sense to do so within a tax-deferred account.

Likewise, bond funds and dividend-producing stock funds or ETFs also tend to have either high turnover or higher yields that can benefit from tax-deferred growth. The very popular iShares Barclays Aggregate Bond ETF (NYSE: AGG) has a whopping 488% annual turnover, while the nearly identical SPDR Barclays Capital Aggregate Bond ETF (NYSE: LAG) clocks in with a 376% turnover figure. Meanwhile, the SPDR S&P International Dividend ETF (NYSE: DWX) sports a 4.2% trailing-12-month yield and a 131% annual turnover, while the SPDR Dow Jones International Real Estate ETF (NYSE: RWX) has put up an 8.8% annual yield. ETFs and funds like these are good candidates for qualified retirement plan investing.

So while the news is not all gloom and doom for retirement investors, those of us who can't count on a defined-benefit plan at our retirement still have some ground to cover. But by continuing to save and increasing our savings rate, crafting a solid asset allocation plan, and choosing smart investments, all of us can be assured of a comfortable retirement down the road.

For more winning mutual fund recommendations and time-tested personal financial planning advice, check out the Fool's Rule Your Retirement service. You can start your free 30-day trial today.

Amanda Kish is the Fool's resident fund advisor for the Rule Your Retirement investment newsletter. Amanda owns shares of iShares Barclays Aggregate Bond ETF. Try any of our Foolish newsletter services free for 30 days.

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