The financial crisis and market meltdown showed many workers just how unhappy they were with their retirement savings plans at work. Burdened with the responsibility of trying to put together a decent investing strategy with high-cost, low-performance investments, some workers have just given up on the idea of using a work-sponsored 401(k) plan to build a retirement nest egg.

But amid greater competition in the brokerage space, one company is trying to change that. Rather than forcing 401(k) investors to choose from subpar mutual fund offerings, you may soon have the ability to pick from among popular exchange-traded funds at a much lower cost.

ETFs and your retirement
(Nasdaq: AMTD) recently announced that it was launching a program to let 401(k) plan sponsors and independent investment advisors offer ETFs to employee participants. By doing so, the discount broker says that it can offer a great deal of diversity to the mutual funds, employer stock, and other options you'll most often find in 401(k) plans.

Given the explosion in popularity of ETFs in recent years, the surprising thing is why it has taken so long to find ETFs in 401(k) plans. But in order to use ETFs, TD AMERITRADE had to tackle a host of legal and technical challenges, including allowing trading of fractional ETF shares and ensuring that trades would settle in a single day rather than the typical three-day process that usually governs ETF trades on stock exchanges.

A winning trade
The move may seem like a no-brainer, but it also highlights the competition to grab and maintain retirement-plan accounts. With $2.9 trillion in retirement plan assets, broker-administrators like TD AMERITRADE have every incentive to try to attract new employer plans.

At the same time, the company also has to fend off new challengers to the business. On one hand, with roughly 4,000 qualified business retirement plans under its belt, TD AMERITRADE doesn't come close to the level of industry leaders Fidelity, Aon's (NYSE: AON) Aon Hewitt division, and Vanguard. But with big Wall Street banks JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), and Wells Fargo (NYSE: WFC) going on hiring sprees to try to tap into the multitrillion-dollar source of potential managed assets, TD AMERITRADE clearly had to take the initiative.

Indeed, TD AMERITRADE isn't the first to turn to ETFs for retirement plans. ING's (NYSE: ING) ShareBuilder unit has had an all-ETF 401(k) plan available for quite a while. And ETF giant BlackRock has been trying to plug its iShares line of ETFs into retirement plans to keep ahead of its ETF-manager competitors.

How to handle ETFs
The key element for companies seeking to offer ETFs in 401(k) plans will be getting a handle on how to educate their workers to use them properly. In all likelihood, that means that you shouldn't expect to get a wide range of sector-specific ETFs that let you tailor your retirement portfolio to your exact specifications. Rather, what you're most likely to see are broad-market index ETFs with highly diversified portfolios -- the sort of ETFs that could take the place of similar index mutual funds without making a big splash among investors.

If you get ETF options in your 401(k) plan, keep in mind that first and foremost, we're still talking about your retirement money here. For investors with long time horizons, you'll want to invest that money aggressively to give it the best chance to grow. Whether a broad stock market ETF is the best way to get that exposure depends on the other investment options you have available. But if a stock ETF is present in your plan, it's definitely worth taking a look at it to see whether it might be your best choice.

With pressure to differentiate itself from E*TRADE Financial (Nasdaq: ETFC) and other discount broker competitors, TD AMERITRADE has taken another step forward in serving customers by trying to improve ETF offerings. By making investing more transparent and less costly, ETFs could make 401(k) plans much better at fulfilling their initial promise of helping workers across the nation retire richer.

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