401(k) management: Debt repayment and investment strategies

Retirement savers face various strategic decisions regarding 401(k) management, ranging from investment selection to using funds for debt relief. Individuals may access 401(k) assets through loans or withdrawals to manage high-interest debt. While loans allow for repayment over time without immediate income tax consequences, withdrawals are generally permanent and can trigger significant taxes and a 10% penalty if the individual is under age 59½. Not all employers are required to offer loan or hardship withdrawal options.

Regarding investment management, many savers do not actively select their own funds. In Vanguard retirement plans, only 31 percent of savers choose their own investments. In cases where no selection is made, money is often routed to target date funds, which were offered in 96 percent of Vanguard plans at the end of 2025. While these funds automatically shift from growth-oriented stocks to conservative bonds as retirement approaches, some financial advisers suggest they may not always be the optimal choice for every investor.