It's especially important to look at the holdings if you own investments outside your workplace plan, says Rosenbluth. If you owned Apple stock last year, for example, you may have been overexposed since Apple is one of the most widely owned stocks among all mutual funds and is likely held in your target-date fund. Buying more would add to your Apple exposure, and maybe too much. "You'd be doubling down on Apple," Rosenbluth says.
If you are like the average investor, you own not one but four funds, according to Investment Company Institute data. It helps to know how they complement each other or throw your allocation off balance. Since the target-date fund is already 100-percent allocated for your age, the others will almost certainly throw off your investment mix.
"The downside is it assumes it is your only pool of assets," says Ramsey Alwin, senior director, economic security initiative for the National Council on Aging. Frequent job changes—the norm in the present economy—also create disruption for the funds' long-term strategies.
Find out what you are really paying. Even with the rise of low-cost options like exchange-traded funds and discount brokerage accounts, some fund companies still charge mightily for their target-date products. Fees range widely, from Vanguard's low 0.18 percent to as much as 1.7 percent for others.
Also, fees alone don't tell the whole story, since there are sometimes buried costs for target-date funds, says Susan Fulton, financial planner and founder of wealth manager FBB Capital Partners. Financial advisers say to be wary of target funds made up of the company's own funds.
"Target funds are great for young people who can take more risks. They can benefit from having investing in someone else's control and the long-term strategy of the target funds at a relatively low cost," says Fulton.
But older investors with more complicated needs and less time to reach goals need to pay more attention. A financial adviser who charges a 1 percent annual fee can come close to matching or even undercutting the target-date fund, and provide a personally tailored solution for retirement, Fulton says.
"The funds are good allocators of assets," says ING's Zemsky. "Individuals are not very good at that." As they become the default option for millions of investors, they are like a starter house for retirement plans, he says. But you might not want to retire in there.