Karen Young is an amateur photographer, plays golf, enjoys traveling and loves "anything outdoors." Notice that investing isn't one of her interests. She saves regularly, but the St. Louis corporate writer takes no pleasure in picking and choosing among stocks and mutual funds. "That's why I love target-retirement funds," Young says. "They do all the work for me."

Judging by the $60 billion now in target-retirement funds, Young isn't alone. Also called life-cycle funds, they put your retirement saving on autopilot and are simplicity itself. Just select the fund whose name contains a date about the same year as you plan to retire. Add money regularly. Relax. These funds become more conservative -- fewer stocks and more bonds -- as you grow older, so they match your need for more financial stability as you approach and live in retirement. "The fund company picks the funds and makes the changes," says Young, 38. "They're experts, so I don't have to be one."

Of course, a great idea is only as good as its execution. And as with all types of funds, life-cycle funds have stars and stinkers. Fortunately, you can eliminate many funds based on the expenses they charge. Ignore ones whose annual fees approach or top 2%, and try to pay less than 1%. Because target-retirement funds often invest in other funds, they can have two layers of fees -- those of the under-lying funds and an additional expense on top. Be sure you know what all the relevant fees are. Some target-retirement funds even charge sales loads. Unless you're getting financial advice, you shouldn't pay such a fee.

Performance, of course, is a chief reason for choosing life-cycle funds. Because most life-cycle funds haven't been around for more than a few years, it's impossible to make performance comparisons for the past five- and ten-year periods. However, based on the performance of funds that are used as the building blocks of life-cycle funds, we think American Century, Fidelity, T. Rowe Price and Vanguard all offer superior choices.

Difference of opinion

Another component of performance is the recipe used to mix the funds -- especially the proportions of stocks and bonds. The more bonds you use, the less volatile the anticipated performance, but the lower the long-term return.

Fund companies use distinctly different cookbooks. For example, T. Rowe Price Retirement 2015 invests 71% of assets in stocks, while Vanguard Target Retirement 2015 has a paltry 47% in stocks (see the table). Why the huge difference? For many fund companies, investor behavior has a strong influence on the mix. [Editor's note: Vanguard announced earlier this year that its target funds will lean more heavily toward stocks. Vanguard is also tweaking its mix for some funds. Read more.]

American Century and Vanguard take into account that investors in 401(k) plans often panic and lose money by selling stocks after big declines. "We don't want to give people an incentive to do something stupid," says American Century's Jeff Tyler.

Fidelity found that retirees generally spend their money faster than they should and factored this tendency into designing its Freedom funds. That, again, led to a greater proportion of bond funds to reduce volatility.

Of our four favorite families for life-cycle funds, we like T. Rowe Price's recipes best. T. Rowe has the highest percentage in stocks and comes closest to the proportion Kiplinger's recommends for retirement-savings portfolios. Jerome Clark, manager of the T. Rowe Price Retirement funds, notes that, over time, the risk from having a high percentage of your money in stocks or stock funds diminishes. "In investing for retirement, your biggest risk is outliving your money," he says.

MORE: Kiplinger.com | Your Retirement | Forty Plus | Magazine

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