Happy National 401(k) Day!
Bookending the first week of September with Labor Day is a less recognized holiday that may not get much national attention but should if you are planning for your future: National 401(k) Day.
Though we are in an era of overall declining economic confidence, many Americans are still somewhat upbeat about their retirement savings. However, how you feel about your 401(k) account may not reflect what is actually in it. National 401(k) Day is an ideal opportunity to take stock and ensure that your plans keep pace with your expectations—for both yourself and your loved ones.
The State of the 401(k) in 2025
The 401(k) has become one of the most essential tools for building and transferring wealth in America.
As a product of late 20th-century tax policy that shifted the responsibility for retirement savings from employers to individuals, today roughly 6 out of 10 Americans say that they have a 401(k) or similar employer-sponsored defined contribution plan.
In 2025, the average 401(k) balance for Americans across all age groups is $315,820, but that number varies widely.
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People earning $75,000–$99,999 annually have a median balance of $53,112.
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Those earning $50,000–$74,999 have a median balance of $27,528.
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Workers in their 40s tend to have more than twice the savings of workers in their 30s ($158,093 versus $77,546).
This underscores the power of compounding growth and the importance of saving early and consistently.
Why Long-Term Planning Is So Hard—and So Important
If you have struggled to prioritize long-term savings or estate planning, you are not alone, and it is not simply a discipline issue. Poor planning is inherently human.
A major reason many people find it difficult to plan for the future is because of what experts call the “time horizon problem.” We are wired to prioritize short-term wins over long-term gains. The further away the goal, the more abstract—and harder to act on—it becomes.
This helps explain why estate planning lags even further behind retirement saving. About twice as many Americans have a retirement account (6 in 10) as have an estate plan (1 in 3).
And while retirement savings concepts such as tax-deferred growth, employer contributions, and spending goals may feel familiar, estate planning can seem daunting, time-consuming, and filled with legal jargon.
Passing on Your 401(k): Directly or Through a Trust?
For most people, a retirement account and their primary residence are among the most valuable assets they will ever own. However, the rules for passing them on to loved ones are very different.
You may have named a beneficiary when you first opened your 401(k) account, but is that designation still what you want? Life changes—marriage, divorce, birth of children, estrangement—may mean your current beneficiary form no longer reflects your wishes.
If your 401(k) passes directly to a beneficiary:
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That person receives full access and control immediately.
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There are no restrictions, which may not be ideal for minors, special needs individuals, or beneficiaries with poor financial habits.
Instead of naming individuals directly, you can protect your loved ones by naming a revocable living trust as the beneficiary in your estate plan. But not just any living trust will do—you need to ensure it's structured properly to protect your beneficiaries.
Conduit and Accumulation Trusts for 401(k)s
If you designate a trust as your retirement account's beneficiary but it does not meet certain IRS rules, the entire account may need to be paid out within five years—leading to a bigger tax bill.
A properly structured see-through trust allows the IRS to “see through” the trust and treat beneficiaries as if they were named directly. This often results in a 10-year payout term, typically reducing tax impact.
Once you have a see-through trust, you'll need to decide between a conduit trust or an accumulation trust.
Conduit Trust: The Pass-Through Option
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Withdrawals from the 401(k) must be distributed to trust beneficiaries within the same calendar year.
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Distributed funds are taxed at the beneficiary's income tax rate.
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Once distributed, funds are no longer protected by the trust.
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Under the SECURE Act, most nonspouse beneficiaries must withdraw all funds within 10 years. A conduit trust allows the trustee to manage distributions across that period, helping reduce tax burdens.
Accumulation Trust: The Discretionary Option
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The trustee must withdraw all funds within 10 years but does not need to distribute them immediately to beneficiaries.
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Withdrawals retained in the trust are taxed at trust tax rates, while distributed funds are taxed at beneficiaries' personal rates.
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Funds kept in the trust remain protected from creditors, lawsuits, or reckless spending.
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Offers greater flexibility, making it useful for minor children, special needs beneficiaries, or spendthrifts.
Take Some Time to Reflect on National 401(k) Day
National 401(k) Day may not bring fireworks or parades, but it's a day worthy of reflection.
As summer winds down, remind yourself of the hard work and sacrifices that have brought you here. You may still be contributing to your 401(k) or finally enjoying its rewards—either way, you want it to last as long as possible.
The trust structure you choose today can help ensure that your 401(k) not only supports your future but also protects your heirs long after you're gone. But trust-based planning isn't as simple as filling out a form.
An experienced attorney can help you avoid unnecessary tax bills, early distributions, and missed opportunities for protection.
Next Steps
Time may not actually be moving faster, but you don't have forever to work on your estate plan.
