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The 401k is the de facto replacement for the pension plan. When our fathers were working, not only could they buy a brand, new '65 Goat with a 389 tri-power, there was at least the expectation that their company or union pension plan would fund their retirement. Most workers today are under no such illusions. Enter the 401k plan. The 401k is an example of a defined contribution plan, while traditional corporate pension plans are of the defined benefit variety. According to the Profit Sharing / 401k Council of America, about 440,000 U.S. businesses offer 401k retirement plans to their employees. Chances are good your employer is one of them, and you're a participant.

The good news is that you've got a much greater degree of control over your destiny with a 401k than with the old pension plan. For some workers, that's also the bad news. There a few mistakes you can make when aiming for a cushy, 401k-funded, retirement. The big mistakes, and the ones that get the most ink, are failing to contribute and starting too late. By failing to contribute at all, not only are you completely missing the boat on funding your retirement plan, in most cases, you're committing the cardinal sin of leaving free money on the table. The free money is your employer's matching contribution. Much has been written on this error. Suffice to say; don't make this mistake.

Staring too late will case you to miss the boat on the much of the power of compounding. If you invest early, even if you can only manage to set aside a small amount, you'll come out way ahead when it comes time to take the gold watch. It can be the difference between putting that watch in a glass case on your travertine and walnut mantle or heading to Larry's Guns and Loans with it.

The 401k mistake that doesn't make nearly as many lists of 401k mistakes to avoid is choosing 401k accounts with excessive fees. Make no mistake, the 401k is just an automatic investment in a fund, usually a mutual fund. These funds often have fees used to pay various expenses incurred by the fund, such as advertising, and the fund manager's salary. These fees vary widely by fund. You'll find them in the different fund's prospectus your HR manager passes around when you sign up for the plan. It's up to you to use some due diligence to determine which of the choices your firm offers has the best return after the fees are accounted for.

By some estimates, you could lose over 20% of your funds return due to excessive fees. Obviously that can derail your dreams of trips to Europe and that little sports car you've always wanted. What should you look for? Well, when you're examining the prospectus or perusing the Internet, you'll notice three main fees and expenses associated with your fund(s). Before you even get to those, you'll probably have to pay a set up fee to get the ball rolling. Then, you 'll have to deal with these three gems. The load, which your fund may or may not have, is the expense the fund incurs by paying the broker to sell you shares in the fund. They're also known as disbursement fees and commissions. You'll probably also see advertising and promotion fees. These pay for all those really neat ads you see between watching Maria Sharapova'a cute, little ass bounce around as she tries to intercept that passing shot. The advertising fees for your fund(s) should be as low as possible, hopefully around a quarter of a percent.

There'll be another fee you'll be paying. That's the fund manager's salary. Yep, he's got to eat too, and he or she wants to send their kids to the best schools, naturally. So how much of your retirement should you contribute to help theirs? That number varies widely, and it's not always a case of you get what you pay for, either. According to 1998 study by the U.S. Department of Labor, the investment management fee can be up to 90% of the total fees levied against the account. On some plans you may see what are known as wrap fees. These are most often seen on plans offered by insurance companies, and most commonly with annuities. The wrap fee looks at the total asset values of the account and levies a fee based upon that value.

You need to examine the expense ratio to determine how the fees will impact your retirement plan's growth. You can find that listed in the prospectus as well. Take a good look, and compare the different funds you're offered before deciding upon your asset allocation. It may be a good idea to get some professional help. After all, the results of decision you make when choosing the different funds to make up your 401k, could be with you far into the future.

One last note – Do not over invest in your company's stock. You're already tied to them with your job. You don't want to have all your future eggs in one basket.