In Brief

KNOW-NOTHINGS Most people don't manage their 401(k) funds well, according to a batch of studies undertaken by John Hancock Financial Services, Fidelity Investments, Putnam Investments and AARP. Why? Because they are too ignorant, too optimistic, too busy or too lazy. Are you one? Do you know what you should save? The returns and risks of the stocks and bonds that make up your funds? Here are a few no-nos: cashing out 401(k) balances when changing jobs despite heavy penalties; failing to diversify enough and reallocate in a timely way. No wonder, since half of us spend less than six hours a year managing or monitoring our accounts. "For most people, self-directed retirement plans are a bad idea," says Wayne Gates, Hancock's investment and pension general director, whose company has been following 401(k) investors for a decade. He recommends investing the maximum to provide a greater margin of error, hiring a financial planner or investing in life-stage funds, which automatically reallocate, depending on your age and goals.

PLAN B, FOR TYPE A's On the opposite side are 401(k) investors who like instruments traded in real time. For them, the likes of Barclays Global Investors, State Street Global Advisors, Merrill Lynch and the Bank of New York are looking into adding exchange-traded funds to retirement-plan options. These hybrid instruments track indices the way an index fund does--you own the whole market--yet they can be traded like a stock. David Blitzer, Standard & Poor's chief investment strategist, recommends them for 401(k)s because they're easy to understand and offer diversification and low cost.