You could be making this 401(k) mistake

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You could be cheating yourself out of some retirement money without even knowing it.

Two in three people saving money in a target-date fund are not using it correctly, according to a report from Financial Engines.

When you're choosing the funds for your 401(k), a target date fund (TDF) might be one of your options. It's supposed to be an easy way to choose your investments. Rather than selecting a handful of different funds to create the right mix of stocks and bonds yourself, a TDF will do it for you.

It's designed to hold ALL of your assets and still keep them diversified. And it will automatically shift your funds so that your investments become more conservative as you get closer to retirement.

But a majority of people are not putting all of their 401(k) assets in the TDF. Instead, as they amass more money, some people start adding more funds in addition to their TDF.

Adding more investments to an already diversified fund can leave your asset mix skewed.

If you have a TDF, you really should be going "all in," said Chris Jones, chief investment officer at Financial Engines.

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Those that spread their money around, saw lower annual investment returns (by an average of 2%), than savers who kept nearly all of their 401(k) assets in TDFs, according to the report.

Some people get scared because it feels like they have all their eggs in one basket, Jones said.

Even though a majority of those surveyed said they understood that the TDF alone offered a diversified portfolio, they still wanted to use another fund or asset manager.

The reasons? Sometimes they wanted to take on more risk. Doing so within a TDF is hard to change since the investments are predetermined and dependent on how far away you are from the date you selected as your retirement. You probably chose that date when you first opened your 401(k).

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More and more employers are offering a TDF, and some are making it the default option. TDF usage doubled between 2006 and 2012, but it still accounts for less than half of all retirement investors.

If you do have a TDF and want something more personalized, Jones suggests seeking a professional to manage your account. Or, you can invest in two different TDFs, which have different asset allocations.

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