What You Need to Know About 401(k) Fee Reports

Here’s how to use new 401(k) fee information to grow your nest egg.

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Check out investment performance. Fees, while important, are not the only factor you should consider when selecting investments. The average annual return for each investment option will be listed over the past one-, five-, and 10-year periods. "Performance data is important to look at because what it does is to give you a history of each investment option. An investment option might be great today—doing gangbusters—but it is import to look at how it has performed over a period of time," says Assistant Secretary of Labor for Employee Benefits Security Phyllis Borzi. But she adds: "The way the fund has performed in the past is really no indication of how it is going to perform in the future."

[See 10 Things You Should Know About Your 401(k) Plan.]

Compare returns to the benchmark. It's difficult to know if a specific investment is performing well unless you have a standard to compare it to. Listed near each fund on your chart should be a benchmark, which you can compare each fund's investment performance to. For example, let's say an international fund in your 401(k) plan earned an annualized 2.29 percent over 10 years. To decide if that is a solid return, you'll need to compare it to the benchmark for international funds. Borzi compares the benchmark to the world-record line in Olympic swimming competitions. She says: "It's a yardstick that you can use against which you can measure the performance of the individual fund."