Adams also points out that "you need to understand certain things about yourself. How comfortable are you with seeing your account balance wobble up and down?" Less risk tolerance means you may wish to allocate more to bonds.
Although every individual has different needs, Gadkowski generally recommends that participants choose at least four options: a large, midsize and small-cap fund, as well as a bond fund. "If they have a company stock option, that should be no more than 10 percent (of the portfolio's allocation)," Gadkowski says.
It might also be a good idea to get some exposure outside the U.S. by investing in a foreign stock fund. (Tinker with Bankrate's asset allocation calculator.)
In recent years, employers increasingly have included target-date funds in their lineups. These are one-fund solutions to the asset-allocation quandary that novice investors face. Bankrate's story on target-date funds explains their pros and cons.
3. Rebalance as needed
Once you make your fund selections, you can coast along. But you do need to do an occasional tuneup.
"Most people can come up with an allocation between stock and bond funds that they feel OK with," says Adams. "The problem is they don't go back to those options they've made and revisit them. So what happens is the market will rebalance your portfolio for you, and not always in ways that you'd like."
Gadkowski agrees. "The biggest problem is no one wants to look at their 401(k). I have clients making half a million dollars and they never look at it. But they'll spend hours on their lawn or their golf clubs."
She suggests looking at your 401(k) every quarter, and rebalancing it every year. Reduce your winning investments to an appropriate proportion of your overall portfolio. That strategy is known as buying low and selling high.
Outside of your retirement plan options, Gadkowski also recommends additional personal savings of after-tax dollars. "That allows you to do the things you want to do in retirement -- the trips, spoiling the grandchildren. In most cases, you can't save enough in a 401(k) to have as much as you need in retirement because limits are too low."
Another consideration if you don't want to track investment earnings every year for Uncle Sam: Invest in a Roth IRA.
The most important thing? "Make the right moves at the right time," she says. "In my experience, 57 is the average age when people want out. They start looking at their retirement and panicking if they don't have enough."
Start worrying about it earlier by assessing your future income needs, and you'll have a much better chance of enjoying a happy retirement.