A Primer on Easy-to-Use 401(k) Funds

Participants choose lifecycle funds based on the date it will expire, which should correspond with a planned retirement date. (For instance, a 40-year-old investor today would choose a fund that expires around 2035.) Those who plan to gradually move into retirement can also opt to "ladder" funds with different expiration years.

The number of Fidelity Investments plans that maintained a lifecycle fund as the default option has risen from 8% at the end of 2005 to nearly 50% at the end of the first quarter. Those funds' share of overall participants grew from 26% to 68% over the same period. Fidelity represents about 20% of the retirement-fund market.

A Fidelity survey of employers also found that nine out of 10 that are considering a change in default option expect to switch to a lifecycle plan.

Fidelity and Vanguard, its competitor, offer a host of such lifecycle funds. BankingMyWay.com features calculators that estimate how much individuals will need to save for retirement.