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Not sure if your retirement is on track? You’re not alone.

The popular press is awash with statistics and stories about how individuals are being forced to delay their retirement. For most of us, the days of retiring at age 65 with a gold watch and a guaranteed lifetime pension (a.k.a. a ’defined benefit’) are long gone.

We have ’defined contribution’ retirement plans (401k, 403b, 457b and IRA) which provide us only the ‘opportunity’ to save a limited pre-tax amount each year of employment, but provide no guarantees in retirement.

Some people take comfort in Social Security and Medicare. But the sharp calls for reductions in entitlements in the face of budget deficits do not bode well for the idea that federal programs will be a retirement savior. We have to face the fact that we are, basically, on our own when it comes to retirement.

So what should the average American investor do?

Invest in your financial literacy

Higher earning power alone doesn’t ensure a successful retirement. Basic financial literacy is a critical life skill, regardless of whether you manage your money on your own or with the help of an advisor. Financial literacy can be just a click or two away. Online investment services now offer personalized advice and help you understand why they recommend the strategies and investments they do, educating you along the way.

Take advantage of available retirement plans

When you start a job, enroll in the retirement plan. While this sounds basic, the Department of Labor reports that approximately 30% of eligible workers do not participate in their employer’s 401k plan. Most employers offer access to some form of tax-deferred plan.

Contribute as much as you can afford. If you are fortunate enough to work for a company that matches employee 401k contributions, contribute at least to the company match level. Your employer is effectively paying you to save.

If you are self-employed, open a SEP-IRA or equivalent plan. The main idea: Get the retirement ball rolling. The earlier you start, the longer the pre-tax money can work for you!

Retirement Savings (Photo credit: Wikipedia)

If and when you change jobs, ‘rollover’ your 401k. Transferring these ‘orphan’ retirement accounts to an IRA account at a quality online brokerage firm ensures easy access to a broad selection of low-cost investment options such as Exchange Traded Funds (ETFs ). A recent GAO Report suggests that, in some cases, rolling over to your new employer’s 401k may be a better option. In either case, find a new home for your ‘orphan’ 401k. You will also be more likely to review and manage the investments if they are at a brokerage firm or in your new employers’ plan rather than in a former employers’ 401k plan.

Changing jobs also offers a good opportunity to see if converting to a Roth IRA or Roth 401k is right for you. This is especially important for younger people, as paying taxes today and having your money grow tax free can make more sense than deferring those taxes until later.

Investors have a number of options outside of an employer retirement plan. One option is to contribute after-tax dollars in an IRA. You and, if married, your spouse can typically contribute $5,500 ($6,500 if 50 or over) each for tax year 2013, even if only one of you is employed.

Another, often overlooked option is to explore Treasury Direct (www.treasurydirect.gov ) which offers direct access to bonds from the U.S. Department of Treasury. Invest in I Savings Bonds. which offer inflation protection with higher rates than Treasury Inflation Protected bonds and better tax treatment (Treasury Direct I-Bonds ).

‘Raid’ your 401k or other retirement plans as a last resort. The immediate financial penalty is a 10% tax surcharge on the gains withdrawn and the entire amount taxed at your ordinary income tax rate. The long-term cost is the lost tax-free compounding over the many years into retirement.

Get the most out of your retirement savings

Manage all your accounts as a single portfolio for best results. Managing your accounts separately makes it difficult to see the big picture. Plus, managing all your retirement investments as one portfolio allows you to take advantage of the tax characteristics of different accounts (tax-free, tax-deferred and taxable), placing the right asset classes in the optimal accounts.

Taxable bonds, for example, should typically be held in tax-deferred accounts, while low-dividend domestic stock index funds are better held in taxable accounts. An ‘asset location’ strategy should be combined with tax-loss harvesting in taxable accounts to minimize the payout to the IRS and maximize what you can spend in retirement.

The seminal “Determinants of Portfolio Performance ,” 1986 study of institutional investors found

ETFs and Mutual Funds (Photo credit: Wikipedia)

that asset allocation can explain over 90% of portfolio return variability, with security selection and market timing having limited impact. Ensure your portfolio’s asset allocation is optimal and that it fits your circumstances, risk profile, time horizon and investment style.

Selecting the optimal investments for each of your accounts can be intimidating and a topic for another post. A well allocated portfolio built with low-fee index mutual funds or ETFs is often the best option for individual investors.

It is particularly risky to hold company stock in your 401K. If your company hits a rough patch not only will your company stock decline, but it might have an impact on your salary or you may lose your job.

Circumstances change. You age, get married or not, have children or not, and retire. Your portfolio also shifts and changes with the market. So periodic reviews of your asset allocation and regular re-balancing can help you stay diversified and reduce unnecessary exposure to risk.

Live your life

Your portfolio is a means to an end, not an end in itself. Whether you manage your own portfolio, work with a traditional advisor or use emerging online investment services, a well-conceived investment strategy should offer you a more secure retirement to enjoy on your terms.