Terry Savage

Open the envelope, please! If you are one of the more than 72 million employees invested in, or eligible to join, your company 40l(k) plan, you'll be getting some very valuable information in the mail. It's the newly required 40l(k) fee and expense disclosure form, now being required by the Department of Labor's Employee Benefits Security Administration.

Using this information wisely could make a huge difference in your retirement plan results. The DOL estimates that paying just 1 percent in additional (and unnecessary) fees each year could reduce your retirement plan balance by 28 percent over a long career.

For example, someone who has $25, 000 in savings and receives an annual return of 7 percent, paying just 0.5 percent in fees, would have a retirement account worth $227,000 in 35 years. But pay just an additional 1 percent in fees, with the same investment return, and your balance at retirement would be only $163,000!

Now that you understand the magnitude of the impact of fees on your 40l(k) plan, you might want to look at the disclosure statement a bit more carefully. Again, it should be arriving in the mail any day now and certainly before the end of the year.

If you're one of the nearly 70 percent of plan participants who told an AARP survey that you didn't know your plan had any fees, this will be a wake-up call. It will help you decide on mutual fund investments within your plan, using costs as one input into your decision. And it will show you any additional fees that your plan imposes.

What to look for

This annual statement will include a chart showing the performance of each of your plan options over four time periods: one year, five years and 10 years, and since the fund's inception. Most interesting, it will show the fund expenses in two ways: as a percent of assets and as a dollar amount per $1,000 invested.

This may be a real eye-opener. If your plan includes an S&P 500 stock index fund, the expenses should be well under 0.5 percent. But a managed growth fund may have much higher expenses. It's up to you to decide whether it's worth the additional costs.

Plus, if you don't know how well each fund is doing compared to its peers, (funds which may not be offered in your plan), you can also compare each fund's performance over time to its benchmark index. That will give you some perspective.

Also, the chart reveals any extra expenses being charged to the account, such as service charges for low balances or for investment advice being offered within the plan. And you'll see the impact of accounting, legal and recordkeeping expenses.

Terry Savage

Terry Savage is a nationally known expert on personal finance and a regular television commentator on CNN, CNBC, PBS, and NBC on issues related to investing and financial markets.

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