(MONEY Magazine) – When his company launched its 401(k) plan almost 11 years ago, Bob Johnson saw an irresistible deal. "I invested the maximum 15% from the start," says Johnson, a 59-year-old salesman for Wace, a Chicago design and print firm. With one paycheck and an 18-year-old daughter living at home then, saving that much wasn't easy. But the family agreed to stick to $6-an-entree restaurants and postponed trading in their five-year-old car. "I thought giving up some luxuries would be worthwhile down the road," says Johnson.

No kidding. Today, Johnson presides over $317,000 in his 401(k), placing him among the wealthiest 7% of all 401(k) investors. If he keeps pumping 15% of his roughly $60,000-a-year salary into the plan (with Wace matching 5% of his salary) and his stash grows at 8%, Johnson will reach $447,500 within three years. At that point, the salesman intends to ease into a part-time role for a few years before kicking back for good with his homemaker wife Caryl, now 55. They anticipate a life of golf, fishing, cross-country skiing--and, of course, indulging four grandkids. Counting their 401(k), $8,500 annual Wace pension, the roughly $23,500 a year they expect from Social Security and the income thrown off by a $50,000 IRA, the Johnsons can depend on $31,000 a year well into their nineties.

Before that, however, Johnson must think about the potential for a stock market downturn. That's a risk he worried less about when he was a decade away from retiring. Now, however, with $317,000 to protect and only three working years left to make up losses, Johnson is nervous about the cost of a market dip--as well he should be. If he fails to scale back his exposure to stocks and the market slips 15%, Johnson's 401(k) account could lose a scary $50,000--which would take nearly two years to recoup.

Financial planners Alan Cohn of Bala Cynwyd, Pa. and Michael Chasnoff of Cincinnati think Johnson should finesse this risk by moving his stash into the plan's other, more conservative and diversified investment options. Instead of providing employees individual funds to combine into portfolios that suit their needs, the Wace plan offers four ready-mixed portfolios, each a blend of six to nine stock and bond funds. (The plan also offers three stand-alone funds: a money market, a stable-value option and an equity index fund.)

Currently, Johnson has spread his money across three of the pre-blended alternatives in a mix that sinks about 76% of his total 401(k) assets into stocks. Chasnoff recommends moving 100% of Johnson's 401(k) money into what the plan's adviser, Chicago investment firm Lawton/Russell, calls the Balanced Investor portfolio. It consists of large-company stocks, small-company stocks, real estate, intermediate- and shorter-term U.S. bonds, foreign bonds and international stocks. That will essentially cut Johnson's risk by half.

To minimize taxes when cashing in his prize 401(k), both planners say Johnson ought to roll over his account into an IRA rather than leave it in his 401(k). (See page 127 for more about tax strategies at retirement.) An IRA gives Johnson more investment options--including individual stocks and nearly 6,000 mutual funds. But even the IRA strategy might have a tax trap: Johnson must ask his employer to transfer his money directly into his IRA or to issue a check payable to the IRA custodian to avoid a tax penalty.

Still, Johnson is confident he can minimize the tax man's take. Thinking about how the 401(k) plan is the key to a cozy future for him and Caryl, Johnson has some sage advice for his 35- and 29-year-old kids: "Get into your 401(k) and invest to the max." --Karen Cheney