A client, who I will call Beth, came into my office a couple of weeks ago to tell me about her recent windfall and to get some advice on how to handle her 401(k) going forward.

Beth, who is in her early 50s, has worked for the same local company for nearly 30 years. About 15 years ago, the company "froze" her defined benefits pension plan, replacing it with a 401(k) tax-deferred savings plan. In most years, the company will match up to 3 percent of Beth's salary, if she contributes at least the same amount. But there are no guarantees. And in some lean years, her company contributes nothing.

Beth and her co-workers quickly figured out they were basically "on their own" when it came to saving for retirement. She expected to receive only about $400 a month in retirement pay from her company's "frozen" pension plan.

Recently the company announced that it no longer wanted to administer the pension plan. Workers "vested" in the plan would receive a one-time cash payout. In Beth's case, the payout would be $50,000, which she decided to place in a tax-deferred IRA.

The good news is that she suddenly has a sizable lump of cash to invest. The bad news is that her retirement income, with the exception of her Social Security check, will depend solely on what she can save and how she invests the money.

Beth's is not an unusual story. When 401(k) plans were introduced in the late 1970s, they were intended to be supplemental retirement income. Most mid- to large companies provided defined benefits pensions.

But economic conditions shifted in the late 1980s, prompting companies to dump their defined benefits pension plans and leave workers with only 401(k) plans to prepare for retirement. Today, only about 7 percent of private sector employees have defined benefits pensions, compared to about 62 percent in 1980.

The Employee Benefit Research Institute estimates that the aggregate retirement income deficit for all Baby Boomers and Gen Xers -- that is, the amount by which their savings, plus Social Security, fall short of what they will need in retirement -- is $4.3 trillion.

Basically, they are not saving enough money and they are not investing it wisely.

By investing her $50,000 windfall separately from her company's 401(k) plan, Beth has been able to take control of a small part of her retirement savings. But I advise Beth and others with access to company 401(k) plans to take the following steps:

Participate. Many companies automatically enroll employees. But the default contribution levels are set too low -- often around 3 percent of an employee's pay. Financial advisors recommend 10 percent as a baseline, with 15 percent recommended for workers who start late -- in their 40s and 50s.

Diversify. Every 401(k) plan has investment options. Allocations should reflect an employee's particular circumstances. Some typical examples include: 25 years old and single -- 90 percent stocks, 10 percent bonds; married couple, one child, 35 years old -- 75 percent stocks, 15 percent bonds, 10 percent cash; married couple, 55 years old, goal to retire at 60 -- 50 percent stocks, 35 percent bonds, 15 percent cash.

Don't touch. While cash withdrawals and loans are possible under certain circumstances, these actions will devastate a retirement fund.

Steven Van Metre is a Bakersfield financial planner who specializes in retirement income strategies His website is www.MyRetirementPlanningCoach.Com. These are his opinions, not necessarily The Californian's.