A solid plan: does your 401(k) measure up?

Just because your employer offers a 401(k) plan, don't assume you have a good one. Some are better than others, and the differences can add up to many thousands of dollars in your retirement savings. Here's some of what to look for when you evaluate your 401(k), beyond the vital employer match:

* Real mutual funds or exchange-traded funds (ETFs) "Check out the funds offered in your 401(k)," says Chad Parks, president and CEO of The Online 401(k), a San Francisco-based national provider of Web-based retirement plans for small companies. "Find out the ticker symbols, and type them into an online search engine. If you don't see that they're available to the public, your 401(k) probably invests through a variable annuity." According to Parks, variable annuity investments usually are more expensive than mutual funds or ETFs.

* Good share classes Mutual funds may offer different share classes, with different fee structures. "B shares and C shares tend to be more expensive than necessary," Parks says. "You will be better off with load-waived A shares or, best of all, with institutional shares. That information should be apparent in the names of the funds on the menu." Your 401(k) might offer Vanguard Balanced Index Fund Institutional Shares, for example.

* Low-cost fund choices ETFs are index funds, meaning they are designed to track a stock market index rather than pick winners. Typically, index funds are among the least expensive funds, so you probably have low-cost options if your 401(k) offers ETFs. You can pick actively managed funds rather than index funds, if you want to shoot for higher returns, but having the option to choose low-cost funds is a good sign. "Higher returns are not guaranteed, which is why index funds are better for most people," says Matthew Hutcheson, an independent pension fiduciary in Tigard, Oregon.

* Top-performing funds Retirement investing is a long-term endeavor, so you'll want fund choices that will hold up over many years. Check to see that you have a selection of funds that have been around for at least 10 years, a period that has seen bull and bear markets. Look at the funds' prospectuses to see whether they have ranked among the top half of funds within their categories, for 10-year and longer periods.

* Professional advice As you can tell, making 401(k) decisions is not easy. Therefore, many companies, such as IBM and Freddie Mac, are utilizing financial planners and investment advisers to help employees. Typically, these professionals will make a group presentation explaining how the plan works. If your company makes these advisers available for one-on-one consultations, so much the better.

* Room for Improvement What if you go through the above checklist and discover that your 401(k) plan lacks some desirable features? "Go to the plan's trustee," Parks says. "Under federal law, the trustee has a fiduciary responsibility to offer participants the best possible plan at a reasonable cost."

What's New in 401(k)s

Financial advice A change in federal law allows employers to bring in advisers to help participants make prudent investments.

Automatic enrollment Employers are allowed to sign you up for the plan and start you with a 3%-of-pay contribution, as long as there's an employer match. You can change your contribution or opt out altogether, if you wish.

Roth 401(k)s Rather than get a tax break now and pay taxes on distributions later, with these plans you pay taxes now in order to get tax-free withdrawals when you retire.