Employers are required to pick a list of investment offerings for the 401(k) plan as part of choosing the company they hire to administer your plan. These plan providers are often familiar, big-name investment brokers like Fidelity Investments and Vanguard Group. Insurance companies like Principal Financial Group Inc. and Prudential Financial Inc. provide 401(k) plans, as well. The plan provider acts as the plan trustee and handles all the complicated back-office operations required of a 401(k) plan.

Plan providers send you regular account statements and provide access to your account online. They coordinate with the plan administrator who’s responsible for managing the tax and legal aspects of the plan. If you have questions about your plan that you can’t answer yourself by reading the Summary Plan Document, your employer might refer you to the plan administrator for an answer.

Don’t let fluctuations in your account balance discourage you from continuing to make contributions from each paycheck. Investing the same amount on a regular schedule as the market goes up and down in value is known as dollar cost averaging. This can help reduce the investment risk in your account over time.

The money in your 401(k) is invested according to the choices you make from among the menu of investment options. If you don’t choose one, the plan will invest your money in the default fund. Until recently, most plans had the stable value or money market fund as the default. Employers chose this account to protect the account from losing value, but for many employees this account was too conservative to be a good choice as a retirement investment. After recent ERISA rule changes, employers now use a target-date fund as the default fund. In the end, this fund may be the best choice for you, but research the choices and check for yourself.

The plan provider and your employer want to make it easy for you to understand the investments in your plan. The plan’s website will contain a questionnaire to help you decide how much risk you are comfortable taking with your investments. There will also be a list of the investment choices. Most plans use Internet links in their online investment lists that link to information about each fund. If you don’t already know your optimal mix of investments—your asset allocation—start a new plan by completing the risk questionnaire your plan offers and check the recommended investment mix. Then check the list of choices for the strongest funds in each asset allocation category.

Don’t just pick the funds that have performed the best recently. Ideally, the funds you pick should have these characteristics:

Chapter 7 explains how to pick investments and decide on an asset allocation, but for now, if your plan offers a target-date fund, consider starting your contributions by investing in the target-date fund that matches your expected retirement year.

Your 401(k) plan has two sets of fees: administrative and investment. Both are paid by the plan—you won’t get a bill—but because fees are paid from plan funds, they affect the performance of your account. Administrative fees cover the cost of running the plan itself. This includes expenses such as the cost of preparing annual reports, running required discrimination tests, and supporting the website and customer service department you use to interact with your plan.

Investment fees exist within the investing account in the plan. You won’t see the administrative costs of the plan, but you can check on the investment costs. Some larger companies, which have 401(k) plans with high balances and a lot of employee participants, negotiate with the 401(k) provider to reduce the investment fees in the plan. You can check the regular fees on your 401(k) funds using the fund prospectus, www.Morningstar.com, or the fund’s website. Then check with your employer to see if your plan has waived the regular sales fees.