401(k) losses? Get your money back

There is one and only one surefire way to boost the return on your 401(k): reduce your investment expenses. Cut your fees by one percentage point and you automatically add one point to your results.

But keeping your costs low can be hard to do, since not all 401(k) fees are fully disclosed; you may have no clue what your plan charges. That might be changing. The Labor Department recently released proposals that would require plans to provide more info on fees. And Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee, is calling for even more stringent fee disclosure, as well as a rule requiring plans to offer lowcost options, including index funds. Says Miller: "We need to make sure that the assets of hard-working people are not eroded by high-cost plans."

No need to wait for Congress to act on these reforms, however. In the meantime you can reduce your expenses immediately by sticking with low-cost funds. Most large 401(k) plans offer at least one or two index funds, which typically charge rock-bottom fees. You may also have access to institutional funds, such as collective investment trusts or separate accounts, which tend to run lean.

Over time even small differences in expenses add up. For example, invest $10,000 in the Vanguard S&P 500 index fund, which levies an expense ratio of 0.15%, and you'll have $45,595 after 20 years, assuming an 8% annualized return and after paying $447 in fees. By contrast, if you invest $10,000 in Homestead Stock Index, which charges 0.64%, you would have only $41,010 after paying $2,812 in fees.

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