Imagine you lost as much money in your 401(k) plan as you've lost in the last year -- only it happened slowly.

You'd still be unhappy, right?

Well, that is happening to millions of workers. Fortunately, you can do something about it.

Here's the story. Most employers and workers don't realize it, but employer matching contributions are often wasted money. Over the long term, investment expenses gobble up the employer contributions. Basically, those employer contributions don't go to the employee -- they go to the financial services industry as fees for managing the money.

You can understand this by comparing workers who have identical careers with different employers. We'll start with two workers who have no employer match but very different plan expenses. One works for the federal government. The other is a public schoolteacher. The government worker has the benefit of the Thrift Savings Plan. This retirement savings plan is virtually free. Its annual expense ratio is only 0.03 percent.

Yes, you read that right: 0.03 percent.

If a 30-year-old commits 6 percent of his initial $30,000 salary to this plan, enjoys 4 percent raises for 35 years and earns an 8 percent annual return, he'll accumulate about $555,000 by age 65.

The public schoolteacher, meanwhile, starts with the same $30,000 salary, at the same age, works for 35 years and gets the same annual raises of 4 percent. The teacher joins the 403(b) plan offered by the school district. The teacher makes the same career contributions as the federal worker but is forced to choose an insurance-based plan because that's virtually all that is available to most teachers.

The teacher also enjoys a gross return of 8 percent a year. But the insurance company charges 2 percent a year for its plan. As a consequence, the teacher doesn't come close to accumulating $555,000. Instead, he accumulates about $375,000.

The difference, about 33 percent, is a bit like having the disaster of the last year -- but on the installment plan, with the proverbial easy and affordable monthly payments ...

Expenses make a difference. Over long periods of time they make a big difference. They make such a large difference that you can be as well-off in a low-expense plan with no match as in a high-expense plan with a typical match.

Now let's see what happens to the same worker, making the same contributions, in a plan that is expensive but has an employer match and a worker who has an inexpensive plan with no match.

As above, the worker in the inexpensive plan with no match would accumulate about $555,000 over a 35-year career. A worker in an expensive plan (2 percent) with a 50 percent employer match would accumulate about $562,000 under the same conditions. In other words, a very low-expense plan will accumulate about as much money as a plan that has high costs with a 50 percent employer match!

Yes, I'm providing extreme examples here. While many teachers are stuck with insurance-based retirement plans that cost at least 2 percentage points a year, typical larger employer 401(k) plans have costs closer to 1 percentage point a year. I guess that means only half of the employer match is wasted.

Similarly, everyone can't work for the federal government. So getting costs down to practically nothing isn't too likely.

That said, a little time and energy spent in the pursuit of cost-saving opportunities can make a major difference for today's workers. Here's my list of opportunities:

• Employers can show their concern for employees by giving their plan expenses a careful examination. Cuts in expenses are equivalent to increasing the match.
• Employees in expensive plans should consider abandoning their 401(k) plan participation. Instead, they can create a less expensive plan for themselves. This can easily be done through an IRA. Only higher-income workers will be restricted by the $5,000 annual contribution limit for those under 50. This is particularly true if your employer contribution is in the form of company stock because it raises the risk in your retirement plan.
• Employees in expensive 403(b) plans with no match (such as teachers) should actively consider dropping their sponsored plans in favor of low-cost IRAs.

SIDEBAR

Funds for starting your low-cost IRA

• Fidelity Four-in-One Index fund (ticker: FFNOX) has a minimum IRA opening investment of $2,500 and a current expense ratio of 0.08 percent. The fund has a four-star rating from Morningstar and has been in the top 15 percent of its peer group in all time periods it has existed. This fund is 85 percent equities.
• Vanguard Balanced Index fund (ticker: VBINX) has a minimum IRA opening investment of $3,000 and a current expense ratio of 0.18 percent. This fund also has a four-star rating from Morningstar and beat 86 percent of its managed competition in the 12 months ending Jan. 31.
• T. Rowe Price domestic equity, international equity and domestic bond index funds at expense ratios of 0.30 percent to 0.51 percent. These funds have minimum IRA purchases of $1,000.
• iShares Standard and Poor's Target Date 2040 exchange-traded fund (ticker: TZV). Also available with target dates of 2010, 2015, 2020, 2025, 2030 and 2035, these complete portfolio funds have expense ratios of 0.29 percent to 0.31 percent. There are no purchase minimums, but there is a commission charged when purchased or sold.