In this clip from Motley Fool Answers, Alison Southwick and Robert Brokamp tackle a listener question about returns on retirement funds. Listen in to find out how investors should look at the differences between the performance of their 401(k) and the S&P 500, why they shouldn't worry if their target-date retirement fund had slightly negative returns last year, and how to compare savings options in order to find the best return for a retirement fund.

A transcript follows the video.

This podcast was recorded on Jan. 26, 2016.

Alison Southwick:  All right, the question for today comes from Matthew, also known as "Befuddled in Boston." He says: "I have an option to put my bonus into my 401(k). When I went to do this, I found that my yearly rate of return is -3.58%, while the S&P is up 1.2%. I'm in a target-date retirement fund, and I honestly do not know what I am doing, but I do not like to see negative returns. Should I be worried that I'm in the wrong plan?"

Robert Brokamp: I would say, first of all: Good for you for looking at your returns. This is a particularly good time of the year to do that. You're getting your year-end statements, you can see how your portfolio performed, your funds performed, your investments. Great time to look and see: Are they keeping up? Do you have the right funds and investments? But it's important to do an apples-to-apples comparison. So, he brought up the S&P 500. That's an index of U.S. large-company stocks. As a group, even though that return of 1.2% doesn't sound exciting, that beats just about every other type of investment in 2015. Small company stocks, international stocks, commodities, even bonds -- they either made no money or lost money. So, if you compare anything in 2015 to the S&P 500, chances are it's just not going to look good.

Southwick: It's not going to look good at all.

Brokamp: But that changes from year to year. There will be years where international stocks are the best things to own, and you'll look like owning the S&P 500 will be a bad decision. What you need to do is look over a longer time frame, at least three to five years, and make that right comparison. So, you should only really be comparing your U.S. large-cap funds to the S&P 500. You should be comparing your small-cap funds to the S&P 600, which is an index of small-cap funds.

The reason your target-date retirement fund lost money is because a target retirement fund is a broadly diversified portfolio of cash, bonds, all kinds of stocks, U.S. and international, that is appropriate for someone who's going to retire roughly in the year of the name of the fund. So, if you have a 2035 fund, that means you're going to retire in 2035. It's going to be very aggressive, but it's going to gradually get more conservative as you get closer to retirement. Because it owns all the types of investments that were flat or lost money last year, it's going to look bad compared to the S&P 500. What you really want to do is compare that fund to other target retirement funds.

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