Automatic enrollment has emerged in the last two to three years following an Internal Revenue Service ruling that employers could automatically enroll employees in their 401(k) plan as long as they allowed the employees to fill out a form opting out of the plan. About 14 percent of plans have activated this option to date, according to a survey by the accounting firm of Deloitte & Touche, and the percentage is growing.

Employers are turning to this option for several reasons. Many genuinely want their employees to participate in these tax-deferred plans in order to build a decent nest egg for their retirement. Employers also want to beef up participation rates among lower-paid workers, who typically are less apt to join, because under IRS discrimination tests higher participation rates allow higher paid workers to contribute more to their accounts.

Automatic enrollment has boosted participation dramatically in those companies that have used it. Nationwide, about 75 to 80 percent of workers participate in 401(k) plans where they are available. In automatic enrollment plans, participation hits 95 percent, according to the benefits consulting firm of Hewitt Associates.

Increased participation by workers is good, say financial planners. But workers need to treat automatic enrollment only as a starting point, not a finish.

The first downside to automatic enrollment, say planners, is that the default choices often are too conservative for many workers. Employers often adopt conservative defaults because of regulatory limitations, fear of employee litigation and out of a fiduciary responsibility to act prudently.

The most common default is three percent of the worker's salary, though some companies are raising that to four percent. But three percent is too small a percentage in most cases, say planners. Employers who make matching contributions usually won't put in their maximum match until the worker's contribution reaches six percent. Workers who can afford it also should contribute a higher percentage of salary than three percent in order to improve the chances of attaining their desired retirement goals.

Automatic enrollment also tends to select the most conservative investment choices, such as money market funds or stable-value funds, which typically earn lower returns. But again, say planners, conservative default investments may be inadequate for a worker. Younger workers, for example, usually can afford to invest more aggressively because they can weather the inevitable market setbacks along the way.

Historically, investing in more aggressive assets such as stock mutual funds will earn higher returns over time than lower-earning assets. Investing too conservatively can be just as detrimental to achieving your desired retirement goals as investing too aggressively because inflation will eat away lower-earning returns.

The default picks for enrollment wouldn't be so much of a problem except that workers tend not to adjust those initial choices, studies have found. Workers either forget about them or assume that their employer knows best. A 2001 study by Hewitt Associates found that more than half of the participants had not changed their defaults a year after automatic enrollment.

The same study uncovered another problem about default investments. Smaller contributions and conservative investments mean that accounts grow more slowly, and workers with smaller accounts are more apt to cash out those accounts when changing jobs. Cashing out a 401(k) account can trigger income taxes and early withdrawal penalties, in addition to the loss of continued tax-deferred growth.

While the automatic enrollment at least gets you started in your 401(k), say planners, you subsequently should adjust the default choices to reflect such factors as your retirement goals, your life expectancy, your risk tolerance, your overall financial health, other retirement assets you have and potential sources of retirement income. Don't let automatic enrollment automatically undermine your retirement goals.