The PBS program Frontline recently aired a documentary called "The Retirement Gamble" that cast the entire financial services industry in a negative light, leveling especially harsh criticism at 401(k) plans and mutual fund fees. Were the criticisms warranted? And more importantly, what can retirement savers do to put the odds of success in their favor?

There is a Retirement Problem

The documentary opened with this statement: "Let's begin with one simple fact: America is facing a retirement crisis." Host Martin Smith noted, "Half of all Americans say they can't afford to save for retirement. One-third has next to no retirement savings at all."

No argument there — at least not with the program's description of the retirement landscape. It is consistent with the findings of other surveys, which show large numbers of Americans to be woefully under-prepared for retirement.

The Blame Game

Today’s workplace retirement plan of choice is the 401(k). Introduced in the late 1970s, such plans leave it up to employees to make three crucial choices: how much to save, what to invest in, and how to withdraw money during retirement.

According to the documentary, that's asking too much of the average worker. One 401(k) plan participant told interviewers, "It was overwhelming for me — the knowledge that you had to have in order to invest."

Robert Hiltonsmith figured prominently in "The Retirement Gamble." At first, he was depicted as just another struggling 401(k) participant. "I have a 401(k)," he said. "I save in it. It hasn't seemed to go up. It's awful. I kept checking the statement. I'd be like, 'Why does this thing never go up? This is weird.'"

Hiltonsmith turned out to be a young economist working at Demos, a New York City think tank. Confusion over his own company's 401(k) led him to take a closer look at the plan. Reading the prospectuses of each fund in his company's plan, Hiltonsmith noticed a surprising number of fees, many of which, he felt, were not clearly disclosed: "Why would you think 'Exp. Ratio' means fees? It was very opaque."

Over the course of a career, Hiltonsmith estimated, the average plan participant would pay more than $155,000 in fees.

Putting Fees Under the Microscope

All mutual funds have fees, just as every other type of business has costs of doing business that are passed along to its customers. Still, three points raised by the program are worth highlighting.

First, it's true that some mutual fund fees are not readily apparent. By the time an investor reads about a fund's performance, for example, the "exp. ratio" fees have already been paid to the fund company. "Exp." stands for "expense" and "ratio" means the fee is based on a percentage of a customer's balance. A fund with an expense ratio of 0.98% is charging $9.80 for every $1,000 a customer has invested in the fund to help cover its operating expenses. Some funds list a separate "12b-1 fee" used to recoup some of their marketing costs. While listed separately, those fees are already included in the overall expense ratio.

While a fund's prospectus discloses these fees, when an investor reviews his or her statement, the fees are not mentioned. Instead, they have already been subtracted from the investor's balance — and subtracted in calculating the fund's reported return. For example, a fund that delivers an 8% gross return in a given year while charging a 1.0% expense ratio would show a 7% return on its statement.