How much are you paying to save for retirement?

I'm not talking about the income you're deferring by contributing to your retirement accounts. I'm talking about the fees you're paying for the privilege of making those investments. Consider this simple principle: On average, the dollars you invest today will be more valuable at retirement than the dollars you invest tomorrow or next year, thanks to the power of compounding. You need to get as many of today's dollars invested as you can.

Further, because most retirement savings vehicles have limits on how much you can contribute, getting the most out of every one of those dollars is even more critical than it is with other investments. If you want to maximize your retirement savings, maxing out your investments now -- and getting the most out of those investments -- is essential.

What are you really paying?
But here's the thing: If you're paying oversize fees to make your retirement investments, you're not really maxing out those dollars. Sure, we all know to avoid paying huge loads and to watch out for 12b-1 fees -- or at least we should. But even that pretty good no-load fund may be costing you more than you think. As Vanguard Funds founder John Bogle said in an interview with The Motley Fool a few years back:

Management fees in this industry run about 1.6% for the average equity fund. By the time you add in portfolio turnover costs, which nobody discloses, and you add the impact of sales charges and opportunity costs because funds aren't fully invested, and out-of-pocket fees, you are probably talking about another 1.4% of cost, bringing that 1.6% management fee or expense ratio up to 3% a year. That is an awful lot of money.

Three percent is an awful lot. Even if the total of disclosed and hidden costs on your "no-load" actively managed fund is more like 2.5%, that's still a lot. Think about it: historically, the U.S. stock market has gone up about 10.5% a year. The manager of that active fund has to return 13% year after year just to stay even with the market after the expenses are covered. It's no wonder that nearly three-quarters of actively managed funds end up lagging the market over time.

Small differences, big impact
Small as it might seem, that lag can really put a damper on your retirement. Check out this example. To keep things simple, I'm assuming that you've got $100,000 currently invested, you're 30 years away from retirement, and you'll contribute $10,000 a year between now and then. I haven't bothered to adjust for inflation or rising contribution limits -- you'll get my point.

At 8% -- the 10.5% market average minus 2.5% worth of expenses -- you'll have almost $2.23 million when you retire in 30 years. That's not bad; if you withdraw the standard 4% a year during retirement, you'll have a bit over $89,000 annually. Without accounting for inflation, that seems like a pretty decent living, doesn't it? It's sure to beat Social Security, at least. But look at this: If you'd managed to just equal the market average of 10.5% instead without any expenses, you'd have almost $4 million -- and 4% of that is almost $160,000. Which would you rather live on?

Consider that you can get that latter result effortlessly, just by investing in an index fund. Your 401(k) plan probably has at least one -- make a point of checking it out.

Live larger -- much larger
But this isn't to say that all actively managed funds are bad. Many -- most, even -- aren't worth your trouble, but some are gems. To take this example one step further, suppose you found a consistent high-performing fund, one that managed to regularly beat the markets year in and year out. Suppose that fund managed to average 15% returns over the next 30 years. Think that's unreasonable?

I don't. One fund that has caught my attention lately, Fidelity Value Strategies Fund, has managed to return 22.96% annually (after fees) over the last five years, powered by basic industry stars such as Washington Group International (NYSE:WNG), Valero Energy (NYSE:VLO), and PPL Corporation (NYSE:PPL). Now, I don't know if it'll be able to sustain that performance until I retire in 25 or 30 years, but it seems like a good bet to average at least 15% a year over the long haul.

Plugging that 15% into our example, how does a total of over $11.6 million at retirement grab you? And annual withdrawals of almost $465,000 -- think that'll be enough?

Ninety grand a year or five times that. These little differences in return sure add up, don't they?

The difference between a decent retirement and a spectacular one is often the result of small decisions made years in advance. The Fool's Rule Your Retirement newsletter team, led by Fool retirement guru Robert Brokamp, is dedicated to helping you make the best decisions here and now. Whether you're close to retirement or just starting out, each issue is packed with actionable ideas to help you on your way to a successful retirement. See for yourself with a free 30-day pass. There's no obligation to subscribe.

Fool contributor John Rosevear does not directly own any of the stocks mentioned in this article. The Motley Fool's disclosure policy offers great returns with no hidden fees.