Bracing for their year-end 401(k) statements, many investors who put money in 2010 target-date mutual funds may be facing a delayed retirement.

Target-date funds have recently become popular as a default option for 401(k) plans, in part because investors can take a hands-off approach. The funds automatically adjust to a more conservative asset mix approaching retirement and the fund's target date.

Well, soon-to-be retirees who expected to emerge largely unscathed from 2008's market plunge weren't always so lucky.

Last year's average loss was nearly 25 percent among 31 funds tracked by Morningstar Inc. with 2010 retirement target dates. That's not that much better than the 33.8 percent hit the Dow Jones industrial average suffered in 2008, or the nearly 39 percent drubbing for the Standard & Poor's 500 index.

And target-date funds, also known as lifecycle funds, are hardly created equal. Their strategies vary widely, which explains last year's vastly different performance among funds with identical target dates, 2010 and otherwise. For instance, depending on which 2010 fund investors were in, their 2008 loss may have been as small as 3.6 percent, or as big as 41 percent.

Investors in target-date funds weighted more heavily toward stocks than less-volatile bonds must ask if they've got the stomach to stick it out after being burned last year. And they need to be aware that target-date funds are complex and merit scrutiny, even though they can appear on paper to be the investing equivalent of autopilot.

"The key part for target-date investors is understanding the allocations of the funds — as you would for any other mutual fund — and not closing your eyes,'" said Lynette DeWitt of fund industry tracker Financial Research Corp.

Last year's top performer on Morningstar's list of 2010 funds — the one that lost 3.6 percent — was DWS Target 2010 (KRFAX), which invested heavily in safe assets such as Treasury bonds.

At the other end, Oppenheimer Transition 2010 (OTTAX) posted the 41 percent loss. It has a portfolio heavy on stocks (65 percent) and is more prone to short-term volatility, but could be a better bet for many retirees long-term as life expectancies lengthen.

Like most target-date products, Oppenheimer Transition 2010 is a fund of funds, meaning it allocates investor money across other Oppenheimer funds. Managers gradually shift to more conservative funds and asset categories as retirement approaches.

Oppenheimer Transition 2010 was dragged down by one of its underlying funds last year. About two-thirds of its 30 percent bond component was in Oppenheimer Core Bond (OPIGX), a fund that slid nearly 36 percent because of risky investments in mortgage-backed securities.

Spokeswoman Jeaneen Pisarra said Oppenheimer's target-date funds "offer capital income and appreciation up to and through retirement years. Like all products we offer, these funds are designed to be long-term investments. One-year results are not a true assessment of long-term performance."

Despite target-date funds' difficult 2008, the relatively new products continue drawing new investors because of their automatic portfolio-adjustment features, and their replacement of money-market funds as default options in many 401(k) plans.

Fidelity Investments, T. Rowe Price and Vanguard Group are respectively the top three among 43 target-fund providers as of last September, managing more than three-quarters of all target-date assets, Financial Research Corp. found.

To get the most out of a target-date fund and find a good match for your risk tolerance, experts offer the following tips:

_CHECK ASSET MIX: Target-date funds holding a hefty weighting of stocks — such as offerings from a more growth-oriented provider such as T. Rowe Price — may provide better long-term returns than bond-oriented funds but short-term volatility is higher. Still, remember that you need to anticipate the necessary growth to provide for a lengthy retirement. Investment mixes vary widely — a recent FRC study found stock allocations in 2020 funds varied from as low as 51 percent to as high as 90 percent.

_EVALUATE MANAGEMENT: Providers like Vanguard offer target-date funds that mirror broad indexes, which reduces expenses for Vanguard's target funds to low levels of 0.19 percent to 0.21 percent. But sometimes, active management can help boost returns. While target funds generally adjust portfolio assets at certain dates, some funds allow managers to tweak those allocations up or down slightly depending on short-term market conditions. For example, T. Rowe Price funds can vary up or down 5 percentage points.

_ASSESS COMPONENT FUNDS: Target-date products that invest in other funds are only as good as the underlying funds. How well each performs can vary widely. Since target-date funds typically invest only within the provider's fund family, you've got to have faith in that fund company. And while it may have expertise in stock funds, the company may be weak when it comes to bonds, or vice versa.

_CALCULATE FEES: Some fund companies charge "overlay" fees to manage an aggregate portfolio, on top of the fees from the product's underlying funds. Still, target-date funds generally offer relatively low fees. Over the past two years, their average expense ratio has fallen from 0.95 to 0.70 percent, DeWitt said.

Even if they are more complex than at first glance, target-date funds can be a good choice, particularly for disinterested investors. A Vanguard study found target-date funds helped moderate asset allocation extremes. Thirty percent of participants who didn't invest in target-date funds had risky, all-equity portfolios, with 16 percent holding ultraconservative, zero-equity portfolios. Stock exposure of target-date fund investors generally ranged from 40 percent to 90 percent.

"They are still a very good one-stop shopping option for investors, especially for 401(k) investors who may not have a lot of investing experience," said Greg Carlson, a Morningstar fund analyst.