What to Do When Your 401(k) Leaves Something to Be Desired

Chris Gentry is meticulous about his craft — he’s a professional woodworker at a small company in Brooklyn, N.Y., that makes custom dining and coffee tables, cabinets and interiors.

He creates pieces on his own from start to finish and enjoys that freedom. “It’s nice to have control over the way something should be done,” he said.

Mr. Gentry, 36, is equally conscientious about saving for retirement. He has contributed the maximum allowable amounts to his employer’s 401(k) plan over the past two years and also topped out a Roth individual retirement account. He hopes to buy an apartment and start a family soon with his partner. “It seems like all that will be expensive, so I’m trying to get an early start on retirement savings while I can,” he said. Between the two accounts, he has managed to save $80,000.

His employer kicks in a generous 5 percent of his salary to the 401(k) no matter how much Mr. Gentry contributes. But he worries about the plan’s high-cost mutual funds. “They’re expensive compared with what I can get in the I.R.A.,” he said. He even wonders if he should contribute to the plan at all. “I’m not sure how to determine at what point the fees become so expensive that the benefits of the 401(k) are outweighed by the fees.”

Fees are one of the most important factors of successful retirement investing. They determine how much ends up in your pocket after mutual funds and 401(k) plan providers take their cut. The bite especially hurts younger workers, who face the risk that high fees will compound over time.

“Fees compound in the same way that returns compound,” said Scott Puritz, managing director at Rebalance, a firm that often works with clients on 401(k) rollovers and advises companies on ways to improve their plans. “People are numb to the differences, but it’s a major determinant of long-term returns.”