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NEW YORK (MainStreet)—In an ideal world, you are participating in an employer-sponsored retirement plan, ideally one with matching contributions.

If you are in fact participating, or are considering it, you should continue reading, for not all 401ks are created equal. And this goes for all other retirement plan variations, like 403b's and 457's.

You see, somewhere in the hallowed halls of employer's corporate headquarters, a committee convenes yearly to discuss what investment options will be available to you in your 401(k).

You get to choose which of those options you invest in, but if you don't, the plan will choose for you. Your money will go into the default investment option.

And default investment option's can vary greatly.

For many years I worked for one of the largest retirement plan providers, and I've been a part of the annual committee meetings. I've also dug into the minutiae of numerous retirement plans for clients, so take my word for it: the differences can be dramatic.

Your plan may offer ten different mutual funds while your best friend's plan offers 200. Some participants will think ten are too many while others might think 200 are too few.

If you don't know what your choices are, you better ask someone. You see, the trouble arises when the participant (that's you) isn't aware of what investment options are available, or worse, decides not to choose from among them.

And unfortunately, your default investment option might be a stinker.

And the Winner is…

A few years ago, the default option was frequently a money market or cash equivalent account. That wasn't so bad back when you could have earned interest of 5% or more.

But it is a terrible option today with interest rates near 0%.

As such over the past few years many companies have switched the default investment option from money market funds to target date mutual funds.

What's a target date mutual fund, you ask? It is a mutual fund that invests in an asset allocation model that is appropriate for the investor's age.

Let's say you are a 25-year-old who just signed up for a 401(k) with your new employer. The default investment option for you might be a target date fund that is 75% or 80% in stocks with the remainder in bonds and cash.

With target date mutual funds, the younger the participant the greater the allocation to stocks.

As you age, the fund will gradually reduce its exposure to riskier stocks and transfer more money to safer bonds and cash. When you reach 60 years of age the fund might be 50% stocks, 40% bonds and 10% cash.

But not all 401(k)s will default to an age appropriate target date fund. Some will default to the most conservatively allocated option. You might be 25 but the default could be an income fund which is better suited for an 80-year-old.

Why Target Date Funds

Part of the motivation to set target date funds as the default investment option is your employer's "fiduciary responsibility." Simply put, your employer has to do what's right for you otherwise, you could sue.

That doesn't mean you can pick the riskiest funds, lose all your savings and blame your employer. Your employer won't be held liable for your stupidity. It does mean the retirement plan has to provide a minimum standard of investment options that enables participants to build properly allocated portfolios.

But since many retirement plan participants don't know how to build a properly allocated portfolio (or choose not to choose the investments themselves), the target date fund has become a preferred default investment option.

According to Ibbotson Associates, as of the end of 2012, there is more than $485 billion invested in target date funds, much of that is because of retirement plans.

And, according to the Investment Company Institute, from 1995 to 2011 the number of target date funds in existence jumped from 6 to 412.

The moral of this story: it is up to you to find out what your choices are and to take control of your portfolio. Even though your employer has a fiduciary responsibility you can't know for sure if the default investment option is right for you until you know what it is.

One thing is certain: you don't want to check into it when you are ready to retire only to discover you can't.