For many people, their 401(k) plan account is their biggest financial asset. It's critical to invest it as well as you possibly can. Yet because of the way most employers set up their 401(k) plans, you typically won't be able to choose whatever investment you want. Instead, you'll have to deal with a fixed menu of investment options, some of which might be completely unsuitable for your particular needs.

Dealing with 401(k) investment menus can be hard, but you'll almost always be able to find at least one or two palatable choices that can help you take advantage of the tax benefits that these retirement accounts offer. Here are some ideal things you should look for in order to make the best use of your 401(k).

Three gold eggs, one marked 401k, in a bowl wrapped in dollar bills.

Image source: Getty Images.

What you really want

A select few employers give their employees the perfect scenario for their 401(k) investing. Typically known as the directed account or brokerage option, these 401(k)s will essentially let you put money into a brokerage account that gives you free rein to buy the widest possible range of investments. As long as they're allowed in a qualified retirement account and you can buy them using the financial provider your employer selects, then investments like mutual funds, exchange-traded funds, and even individual stocks will be available to you.

The advantage of the directed account is that you can make your 401(k) investing as complex or simple as you want. If you like stock-picking and think you can do a better job than a fund manager in selecting the best investments, then you're free to do so. If you prefer funds, then you'll be able to select the best ones for your needs. For instance, For those who are comfortable picking individual stocks, this best-case scenario is ideal. You can pick up complete exposure to the U.S. stock market through ETFs like Schwab US Broad Market (NYSEMKT:SCHB) or Vanguard Total Stock Market (NYSEMKT:VTI) at rock-bottom costs, or you can buy ETFs that have more focused exposure on a particular part of the market. As long as the brokerage your employer selects doesn't have ridiculously high commissions, a directed account can be ideal.

What you'll probably have to put up with

You won't often find a directed option, and short of trying to talk your employer into offering it, you'll more typically have to select from a fixed menu of mutual funds. That doesn't mean that you won't be able to save and invest for retirement effectively, but it demands that you pay attention to find the best available choices.

Most 401(k)s today will give you a choice between actively managed mutual funds and index mutual funds. The former come with professionals whose job it is to try to outperform the market, but on the whole, fund managers struggle to do so, and their costs are typically higher. That makes index funds a smarter choice for most investors. By settling for matching the market, you'll be able to find lower-cost alternatives that give you far more certainty about reaching your financial goals. As long as you're careful to make sure that the index funds that your 401(k) plan offers are actually low-cost options, then you'll be in a good position to use them as your primary investment vehicles in retirement saving.

What you can't afford to do

Very rarely, your entire 401(k) will have only poor investing options. In that case, the question is whether to invest in your 401(k) at all. Most 401(k)s will have at least a decent choice that offers reasonable performance and fees that aren't too egregious. Even if you're not thrilled with the options available, it's usually smart to invest at least enough in your 401(k) to qualify for any matching contributions that your employer will make on your behalf.

If all the investment choices in your 401(k) are true dogs, then turning to an IRA instead as your primary retirement investing vehicle can be your best bet. Note, though, that you won't be able to contribute nearly as much to an IRA as you can to a 401(k). Moreover, because you're eligible for the 401(k), lower income limits on deductions for traditional IRA contributions will apply -- even if you don't actually use your employer retirement account.

Be smart about your 401(k)

Keeping costs as low as possible is your best bet for 401(k) investing. If you don't have a directed option to let you buy exactly what you want, make sure to select the best funds off the 401(k) menu that can help you keep more of your hard-earned money in your own pocket and less going toward your fund manager's fees.

Dan Caplinger owns shares of Vanguard Total Stock Market ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.