Will Your 401(k) Ever Recover?

You can't afford to look the other way when it comes to 401(k)s and other retirement accounts. The days of being covered by a comfy pension are over for most of us, so we need to stay on top of our 401(k)s, since there's a good chance we'll be relying heavily on them in retirement. The recent news on the 401(k) front is troubling, but not all of it is bad.

Less matching
A recent Watson Wyatt survey reveals one troubling new development: Roughly 22% of companies have reduced their matching contributions to employee 401(k) and 403(b) accounts. That's up from only 2% this past October, with many more companies expected to do the same. Just in the past month or two, Weyerhaeuser (NYSE: WY  ) , Rockwell Automation (NYSE: ROK  ) , and Micron Technology (NYSE: MU  ) added their names to the list of companies making cuts to their matching programs.

The takeaway here for you is for many of us, there's even less to count on from our employers, and all the more reason for us to get savvy and salvage our retirements.

Relief on fees?
But the news isn't all bad. Congress is looking into requiring 401(k) plans to more clearly report the fees that account-holders pay each quarter, breaking them down into four categories: administrative, investment management, transaction, and "other." Better still, plans would have to offer workers at least one inexpensive index fund.

That's huge, since low-cost index funds are the simplest and lowest-cost option for many of us, and many employees are stuck having to sign up for unnecessarily expensive or less effective funds. Remember, some managed funds can charge as much as 2% or more per year, compared to less than a tenth of that for some index funds. A number of companies, including Wal-Mart (NYSE: WMT  ) , Deere (NYSE: DE  ) , and Boeing (NYSE: BA  ) , have faced lawsuits for allegedly excessive fees in their 401(k)s.

Get saving
Finally, a new survey by the Employee Benefit Research Institute and Mathew Greenwald & Associates finds that most Americans have less than $25,000 saved for tomorrow, and fully one in five has less than $1,000. Yikes. Needless to say, $25,000 isn't enough to make a dent in your retirement needs. Even retiring with $500,000 will give you only a $20,000 annual payout if you follow the 4% rule recommended in our Rule Your Retirement newsletter.

Don't be a victim of retirement killers in this brutal environment. To ensure a secure retirement, you have to use all the tools available to you. For now, that means continuing to use your 401(k) as well as you can.

For more on retiring well, read about:

• How you can wind up wealthy.
• This monster could eat your retirement.
• Is it time to cash out of stocks?