401(k) and IRAs continue to play an important role in the retirement plans of Americans,  despite the crash of 2008 and continuing volatility. But it’s also clear that the system of 401(k) contributions and IRA contributions hasn’t generated the levels of retirement security Americans need.

Some argue that the system of defined contribution has failed and should be scrapped in favor of a Social Security–style, government-sponsored annuity program. Others advocate boosting participation rates by mandating that employers offer plans and automated employee participation.

What role should 401(k) or IRA investing have in your retirement security playbook? What should you be doing now to manage through a volatile market? The answers vary somewhat depending on your age.

Younger investors, who won’t need to start drawing down funds for decades, can afford to be patient. But for anyone who’s retired recently—or plans to retire in the next five to ten years—the questions are much more difficult.

If you’re in the latter group, there are some smart strategic options that can help protect your remaining nest egg, although they’re not painless. The key is maintaining a long-term perspective because the goal here is to make sure your retirement savings last many years into the future.

The question really isn’t what your portfolio looks like today, but how you’ll manage it over a retirement that could last 25 years or more.Ever feel like you’re on your own when it comes to  planning for retirement?

Over the last few decades, much of the responsibility-and risk-of on-the-job retirement investing has shifted to employees. Fewer workers have traditional defined benefit pensions. And while many employees still have defined contribution plans, such as matching 401(k) plans, they handle their own saving and investment decisions.

Here’s the problem: For most of us, do-it-yourself planning leads to needless mistakes and financial loss. That’s because most of us aren’t investment professionals, and we need expert help to reach our goals. This becomes painfully obvious in a rocky economy and stock market, like the one we’re experiencing now.

And there’s one other painful truth: Most people just don’t want to be bothered. Only 19 percent of 401(k) plan participants make a trade of any kind in their accounts in a given year, according to research from employee benefits consulting firm Hewitt Associates. That suggests more than 80 percent of us just aren’t paying attention.

As a result, far too many Americans aren’t financially prepared for retirement. The average household approaches retirement with just $60,000 in retirement savings, according to The Center for Retirement Research at Boston College. That’s just not going to cut it as American retirement security faces growing the growing threat of soaring health care expenses and falling real estate values.

A growing number of Americans seem to know they need help. A survey released this month by Metlife, the insurance and financial services company, shows growing employee interest in getting assistance with retirement and financial planning at work. Forty-nine percent of employees said they’d like some help, compared with 38 percent in a similar 2006 survey. Those expressing interest in overall financial planning rose to 44 percent from 30 percent.

401(k) matching contributions

Although many employers suspended or reduced 401(k) matching contributions in 2009, Hewitt Associates reports that 80 percent of companies that did so plan to restore them this year. When you’re evaluating how much to contribute to your 401(k), set your rates high enough to meet whatever match is available.

401(k) contribution limits

Employee contributions in 2012 for 401(k), 403(b), most 457 plans will be limited to $17,000. The catch-up contribution limit for those aged 50 and over remains is $5,500. More details are available at the Internal Revenue Service website.

Automatic Investing Options

Employers have been adding more automatic features to their retirement plans ever since the Pension Protection Act became law in 2006. Some of that law’s provisions aimed to boost participation in workplace retirement plans by encouraging employers to enroll new workers automatically in retirement plans, and by making it easier to offer target date funds, which rebalance portfolios to a more conservative stance as retirement dates approach.

Automatic enrollment has boosted participation rates, and target date funds can eliminate dangerous asset allocation errors made by consumers, who tend to stay overweight in riskier equities as retirement nears.

So, automation has the potential to boost retirement security for millions of Americans. But if you’re in a plan offering these features, don’t assume automation alone will get you to the destination of a secure retirement without some manual driving on your part.

For example, the default initial contribution rate is too low in most plans featuring automatic enrollment–a median of 3 percent, according to the Towers Watson survey. That’s not enough to build real retirement security; a person who starts saving at age 40 should be socking away about 15 percent of annual income in order to retire comfortably at age 65. At minimum, employees should try to set their rates high enough to match the employer’s top matching contribution. Learn more about automatic investing.

Early withdrawal and hardship withdrawal

Account balances in 401(k)s grow most effectively over time, but about 45 percent of plan participants cash out their 401(k) balances when they change jobs rather than roll them over to new employers or IRAs. That disrupts the long-term growth of their assets.

Borrowing and hardship withdrawals also are allowed under the rules, and people have been tapping into their balances somewhat more frequently during the recession. The government tries to discourage this behavior by imposing a 10 percent penalty fee on withdrawals before age 59½. Borrowing from a 401(k) may seem like a good option if you are hard pressed by hard times, but loans or withdrawals inflict serious damage on portfolios because you lose the opportunity to earn a return on the funds that are withdrawn.

Also lost is the opportunity to earn returns on new investments; in most cases, you can’t make contributions while you have a loan outstanding, and you can’t contribute for six months after you make a hardship withdrawal.

401(k) fees

All 401(k) plans are not created equal. Some employers are more generous with matching contributions; others sponsor plans with mediocre investment choices. And some employees pay much higher plan fees than others. But there hasn’t been much transparency that would help employees–and employers–compare performance against other plans.

Unseen fees charged to investors in plans are one of the biggest variables in fund performance, Alfred says, especially at smaller companies. These include investment product fees, administration and record-keeping fees and other fees for investment advisory services, insurance and auditing.

That’s why a start-up company called Brightscope is making a splash. The company has assembled the industry’s most comprehensive database of 401(k) performance. They’re assigning a simple numerical rating to all the plans–including the ones mentioned above–and making the scores available to investors for free.

Brightscope’s data shows that average 401k total plan cost can be as low as 0.20 percent of assets for the largest plans and a whopping 5 percent for smaller plans. “The biggest problems are at the small end of the market,” Alfred says. “If you’re in a plan with more than a billion dollars in assets, the fees are going to be competitive.”

Learn more about Brightscope and how you can rate your own 401(k) plan’s fees.