Millions of Americans have been handed responsibility the past couple of decades for funding their own retirements, whether they want it or not. Many have turned to target-date funds as an elegant one-stop answer.

With target dates, you fill in the year you plan to retire--say 2030. Professional fund managers handle the rest, gradually shifting your funds from an aggressive stock-heavy portfolio early on to a conservative bond-heavy mix as you near retirement.

Target dates have proven attractive enough to draw in a quarter of a trillion dollars in assets since Wells Fargo ( WFC - news - people ) and Barclays ( BCS - news - people ) Global Investors introduced them in 1994. Over the years a growing number of companies have adopted target dates as the default option in their 401(k) plans, adding to investors' sense of comfort.

That comfort came to an abrupt end when financial markets tanked two years ago and many target-date investors discovered, to their surprise, that their funds were anything but safe. The outcry has prompted Congress, the Department of Labor and the Securities & Exchange Commission to take a second look at target-date funds. Managers, in turn, will soon be required to disclose more prominently each fund's risks.

"It remains to be seen whether they [target-date funds] will live up to their promise," John Bogle, founder of Vanguard Group, said recently.

Rather than await a verdict, here are pointers to consider in deciding whether target-date funds are for you.

### Look at the big picture

If your 401(k) is your only pot of savings, a target-date fund might work fine. For those who have, say, $250,000 in a 401(k) and a similar amount in taxable investments, target dates are probably a lousy idea.

Why? If you hold stocks in taxable accounts and you sell losers along the way you should be able to offset capital gains to reduce your tax bill. Bonds, by contrast, generate steady income streams that, in unsheltered accounts, will be taxed at rates that currently top out at 35% and could go higher.

If this describes you, your best move might be to fill most of your 401(k) with bond funds and leave your equities in taxable accounts. This sort of tax-efficient investing is hard to pull off with target-date funds, or with any fund that holds both stocks and bonds.

### Know thy fund

Before you buy a target-date fund, take a close look at what it owns. There can be significant differences in the riskiness of funds offered by even the big three target-date vendors--Fidelity ($109 billion of target-date fund assets under management), Vanguard ($67 billion) and T. Rowe Price ($48 billion).

Consider their holdings for someone who plans to work another two decades. Fidelity's target 2030 fund is 69% in stocks and 20% in bonds; Vanguard's is split 81% to 17%; and T. Rowe's is 83% to 12%. Which is best? That depends on your taste for risk and view of the markets. If, as some observers claim, the bond market is where the next bubble is at greatest risk of bursting, it may turn out that Fidelity's "conservative" mix will get clobbered the hardest.

### Understand your glide path

When first rolled out, target-date funds hit their most conservative mixes in the year they bore in their names. These days the "glide path" of many target-date funds doesn't come to an end, and the fund its most conservative allocation, until years after the owner reaches retirement.

Extending the glide path makes good sense for fund providers, who'd like nothing more than for savers to let their investments ride. It can make good sense for investors as well--if they know what they're getting, which isn't always the case.

The term "target date" has, in fact, become meaningless or downright misleading, says Joseph Nagengast, a principal of Target Date Analytics, which licenses target-date indexes.

At minimum, take a look at fund literature and make sure you understand your glide path. Like asset mixes, they can vary significantly. Fidelity's target dates hit their most conservative mixes 10 to 15 years after an owner retires. T. Rowe's glide paths end a full three decades later, when the owner may well be in his or her 90s. Or gone.

As an alternative, consider rolling over your 401(k) at retirement into an independent retirement account, where you'll have more investment choices. If you're unsure what to do, hire a fee-only financial planner for help.

### Beware of fees

Target-date funds may be convenient, but they're not necessarily cheap. Fidelity's 2030 fund has 58% of its total holdings, or $8.3 billion, in the company's own Series funds, which it launched last year. Fidelity created them expressly to serve the needs of its target-date investors, says manager Jonathan Shelon.

Customization, it seems, is a costly process. The Fidelity Freedom 2030 Fund charges 0.79% a year. That's more than four times what Vanguard's 2030 fund charges (0.19%). Over several decades such seemingly small differences can have a big effect on returns.

### Speak up

Don't like your 401(k) options? Find the designated plan sponsor in your company and push to have better funds added. It's a small price to pay for a more prosperous future.

#### Moving Targets

Not all target-date funds are created equal, as indicated in the varying asset mixes of the top three vendors.
| Dividened
Company | 2020 | 2030 | 2040
Fidelity | 57% | 69% | 76%
T. Rowe Price | 71 | 83 | 87
Vanguard | 67 | 81 | 89
Data as of Sept. 30. Source: Morningstar.