The market turmoil of recent weeks has been brutal to 401(k)s. But beyond highlighting the woeful inadequacy of many Americans' retirement savings, the meltdown puts a spotlight on some longstanding pitfalls of 401(k)s themselves -- and makes it even more urgent that investors guard against them.

This year through Oct. 30, the average 401(k) account balance dropped roughly 18% to 23%, depending on the participant's age and tenure with the plan, according to Employee Benefit Research Institute.

Among the pitfalls that made that drop especially painful for plan participants is that many workers are taking excessive risks in their 401(k)s, plowing a substantial chunk of their savings into their own company's shares, or keeping all their assets in stocks when they're on the brink of retirement.

Another source of trouble, ironically enough, is the recent effort by regulators and lawmakers to help 401(k) participants. In 2006, for instance, Congress passed the Pension Protection Act, which encouraged employers to enroll workers automatically in 401(k)s, raise their contributions annually and direct the money to one-stop-shopping, broadly diversified mutual funds -- all without employees lifting a finger.

But that move had some unintended side effects. Investing pros say the new employer efforts have led many people to save less than they would if their companies took a more hands-off approach. And some workers have been lured into investments that are inappropriate for their goals.

Both of which could lead to severe problems in this dicey market. Workers might not be investing enough to make up for recent losses, for one thing, and they might be overloaded with investments that are much too risky.

Another challenge for plan participants: Some employers are slashing 401(k) matching contributions. General Motors Corp. recently announced plans to take this step, and other employers are following suit. A recent survey by consulting firm Watson Wyatt Worldwide found that 2% of employers have cut matching contributions due to the market and economic turmoil, and another 4% plan to do so in the next 12 months.

Some retirement experts are already calling the 401(k) a failed experiment. But any major overhaul of these plans is likely years away, should it gain serious momentum, which means that most workers' best option remains the existing 401(k).

Here are key pitfalls to watch for:

1. Your employer's automatic savings rate probably isn't sufficient.

Market pros are predicting low investment returns for some years to come. That makes it vital for workers to put as much as possible into their 401(k)s to accumulate a decent nest egg. But many workers let their company decide how much they should invest -- and that means they're saving a fraction of what they should.

The problem arises because of automatic enrollment. About 30% of defined-contribution plans such as 401(k)s now automatically enroll at least some workers, up from 17% in 2006, according to a survey by PlanSponsor, a retirement-research firm in Stamford, Conn. But the feature -- which typically applies only to new hires -- often sets workers' contribution rate at just 3% of salary.

As a rule of thumb, the employee and employer should together contribute at least 10% to 15% of the worker's salary to be on track for a secure retirement, says Joshua Itzoe, an independent pension fiduciary in Towson, Md. (Workers under age 50 can contribute as much as $15,500 to a 401(k) this year; many plans allow those 50 or older to contribute an additional $5,000.)

To be sure, many people who need to increase their retirement savings, especially in light of the big hits their accounts have taken this year, don't have the financial flexibility to do so. Millions of workers are weighing 401(k) contributions against other pressing priorities, such as paying down credit-card debt and staving off foreclosure.

But for those with the ability to contribute more, the 3% rate used by many companies may be sending the wrong signal, experts say. "If people are auto-enrolled at 3%, the unintended message is that 3% is the number you should be contributing," says Trisha Brambley, president of Resources for Retirement, a retirement-plan advisory firm in Newtown, Pa.

Ms. Brambley believes that companies should auto-enroll workers at a contribution rate that will at least allow them to get the full employer matching contribution, which in a typical plan would mean 6%. Many companies are reluctant to raise the automatic-savings rate for fear of stirring employees' ire by taking a bigger chunk out of their paychecks. Yet research suggests that employers could increase the contribution percentage without causing many employees to opt out of the plan.

Some companies are tackling the problem by raising the contribution level each year, but fewer than 14% of plans that automatically enroll workers employ this "escalator" feature, according to PlanSponsor.

2. Target-date funds are a lot more complicated than they seem.

Target-date funds hold stocks, bonds and other investments, and they automatically shift to a more conservative mix of holdings as they approach the investor's expected retirement date. Yet the definition of conservative can vary wildly from fund to fund -- so investors have to keep a close eye on their funds' holdings, particularly in this roiling market.

Consider target-date funds designed for people expecting to retire in 2010. Among funds at least a year old, the most conservative had 26% of assets in stocks as of the third quarter, according to research firm Ibbotson Associates -- but the most aggressive had two-thirds of assets in stocks.

Those differences in the investment mix can make a big difference in results. While the fund with the most conservative allocation was down 14% this year through Oct. 30, the fund with the boldest stock allocation lost 32%.

Thanks in part to the boost they got from the Pension Protection Act, target-date funds have become the default investment selection in half of all plans, according to Hewitt Associates in Lincolnshire, Ill. Altogether, nearly 60% of plans offer target-date funds, according to a recent survey by consulting firm Deloitte Consulting LLP, up from 28% in 2004.

Resources for Retirement's Ms. Brambley suggests that all workers over 50 examine their target-date fund's holdings to be sure they're comfortable with the investment mix. If you have other sources of income to draw on early in retirement and can give flagging stocks a few years to rebound, a stock-heavy investment mix might be fine for you. But if the fund looks too aggressive, you can tone down the mix by diverting some of your 401(k) money into a money-market or stable-value fund, says Ms. Brambley.