Considerations For Investors’ 401(K) Strategies
As seen on Forbes July 8, 2026
Christopher F. Poch is the Founder & CEO of Promethium Advisors and #1 bestselling author of “Money & Meaning” and “Going Independent.”
Retirement planning is facing a new challenge due to advances in AI and its potential in medicine to help diagnose and treat individuals, possibly extending their lives. AI can support early disease detection and personalized treatments, “substantially impacting mortality rates and reshaping life expectancy across different populations,” according to the SOA Research Institute.
Imagine a future where a patient could go in for their annual physical, leave a few vials of blood and a week later learn they’re showing very early indicators of a disease that could be managed by a combination of treatments tailored to their exact situation.
While this is nothing less than astounding, longer lifespans hold implications for business leaders’ retirement planning. In addition to planning for oneself, business leaders have the opportunity to educate employees to help make better decisions and deepen loyalty in the process.
How Increased Longevity Changes Retirement Planning
Many business owners have a majority of their net worth in their business. As a result, they may not pay close attention to how their retirement plan is invested. If you are like most people and have most of your retirement assets in a 401(k) or similar self-directed plan, odds are high that you have some or all of your assets in a target-date fund.
Target-date funds are typically allocated by the mutual fund sponsor when the plan is overseen. Vanguard, Fidelity, T. Rowe Price and American Funds control the majority of the passive- and active-based target-date market.
The challenge occurs if the asset allocation underestimates the need for growth, should retirees live much longer than backward-looking life expectancy tables suggest. Charles Schwab puts the target asset allocation upon achieving retirement age as 44% stocks and 56% in fixed income and cash. Kiplinger noted that some major retirement plan mutual funds have an equity allocation between 30% and 55% at the target retirement date, though some are as low as 8%.
Using historical return averages over the past 40 years, when interest rates and fixed income returns were much higher and life expectancies grew only modestly, the traditional 60% stocks and 40% bonds portfolio may have made sense. Today, some experts have said it’s “outdated” and can’t provide enough for longer lives.
Risks Of Failing To Adapt
Prior to the Pension Protection Act (PPA) of 2006, defined contribution plans, such as 401(k)s, often defaulted to “safer short-term vehicles,” according to the Investment Company Institute (ICI). The PPA encouraged diversified default investments, and the usage of target date funds has grown significantly. By the mid-2010s they were the “go-to” product and now exceed $5 trillion in assets.
But what started out as a social good could end up costing target-date investors if they fail to adapt their portfolios to modern time horizons. Likely no fund manager has malicious intent, but the difference between the best- and the worst-performing target date manager could be significant.
Today, a growing number of plan sponsors would prefer keeping retirees’ funds in the 401(k) after retirement. Participants should know how their target-date funds are invested and if the allocation fits their objectives and time horizon.
Actions Leaders Can Consider
I’ve seen AI enthusiasts promoting concepts such as “decades of added life,” but no one knows, and the evidence won’t be conclusive until well after it will be useful to someone entering their retirement years today. Assuming inflation averages 2.5% per year, in 30 years, a retiree’s purchasing power could erode, making something that costs $1 today cost about $2.10 in the future. As a result, some may choose what they believe is the “safer route” by not being “too safe.”
Ultimately, every business owner’s situation is unique, so speak with your financial advisor and ask:
1. When I sell my business, and if I live 10 to 15 years longer than expected, how much is enough?
2. Am I optimizing my retirement plan savings? Confirm whether you have the right allocation to growth investments in the retirement accounts as well as taxable accounts.
3. Some established private businesses carry significant cash balances/liquidity. Is your business carrying the right amount, or are there higher-growth opportunities inside or outside of the business to consider?
Educate your employees on how AI could impact their retirement planning as well, and encourage them to consider similar questions. Finally, remember to revisit these issues annually to ensure the advances in AI bring restful retirement years and peace of mind.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
