By now if you are investing in a 401(k) or similar workplace retirement plan, you know that the ups and downs of the stock market or economy can have an impact on the returns of your investment portfolio.

You may know that it’s important to diversify, spreading your money among various investment options so that if one company or industry suffers, your entire portfolio doesn’t suffer along with it.

But many investors still don’t understand how fees charged by their portfolio managers fit into the investment picture. They may know that fees play a part in their return, but they still haven’t really paid much attention to the charges they incur from the people handling their retirement investments.

Fees a mystery

A recent survey conducted for AARP found that 83 percent of 401(k) plan participants did not know how much they pay in fees and expenses related to their plan. The survey – “401(k) Participants’ Awareness and Understanding of Fees” – also found that more than half of 401(k) plan participants didn’t feel they knew enough about the impact that fees can have on their retirement savings.

“With Americans more responsible than ever for making better choices to secure their financial futures, financial literacy and an understanding about those decisions is increasingly important,” said David Certner, legislative counsel and policy director for AARP. “Consumers need to get more informed and ask questions.”

And, boy, are there a lot of fees to consider. As AARP points out, 401(k) plans generally include three types of fees: investment, administrative and individual. These fees range from covering day-to-day management of the investment to operational expenses to charges for individual services, such as when you take out a loan.

Big differences

How much of a difference can fees make?

Take a look at this example by the federal Employee Benefits Security Administration (EBSA). Let’s say you have 35 years until retirement and a current 401(k) account balance of $25,000. If the returns on your investments average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if you didn’t contribute another penny. But what if the fees and expenses were 1.5 percent? Your account balance would grow to only $163,000. That 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.

EBSA has put together a booklet with an explanation of the various 401(k) fees. If you do nothing else, read this publication. There is a helpful 401(k) fee checklist. To get it online, go to www.dol.gov/ebsa/publications/401k_employee.html.

So what else can you do? Here are some other tips recommended by AARP:

¢ Ask questions. Talk to the benefits office at your job and ask about any fees associated with your investment choices. Then compare the fees of various funds similar to the ones you have selected.

¢ If you see that the fees are high, complain to your company. Ask your company to review the fees and fight to make them switch to an investment company offering lower costs.

¢ Curb the fees by limiting hardship withdrawals or the loans you take out on your retirement account. This, of course, means you have to save; you don’t want to use your retirement account as your emergency money.

¢ Consider investing in no-load mutual funds in your company-sponsored retirement plan.

¢ Consider index funds. These funds have lower costs and are comprised of stocks that mirror a certain index such as the S&P 500.

Better disclosure

I know. I’m telling you one more annoying thing you have to do. But the burden shouldn’t be entirely on plan participants. We are entitled to a simple way to determine what we are being charged. How about something akin to when we go to the store? When we buy a shirt or a box of cereal, a price tag clearly marks what we are going to be charged.

The same should be true for the price we pay for the funds we select for our retirement portfolio. AARP has urged EBSA to require better fee disclosure by plan administrators.

This summer, Rep. George Miller, D-Calif., introduced the 401(k) Fair Disclosure for Retirement Security Act of 2007. The legislation would also require plan administrators to disclose, in clear and simple terms, all fees charged to plan participants each year.