Three savings tips for all ages

1. Rebalancing can improve your returns

The average 401(k) plan had 59% invested in stocks at the end of 2008, down from nearly 68% in 2007, according to Hewitt Associates, a human resources consultant.

Most of the decline reflected the drop in stock values vs. fixed-income investments, says Pamela Hess, director of retirement research for Hewitt.

Workers who failed to rebalance portfolios after last year's market collapse missed out on the market recovery that began in March, Kohmann says. "If you're rebalancing and keep contributing, these swings in the market can work to your advantage over time," he says.

In order for rebalancing to work, you need to first determine your target allocation of stocks, bonds and money market funds, Hess says. Once you've figured that out, you should check your portfolio at least annually and make adjustments to get back within your target range, she says.

Rebalancing means selling your winners and putting money in your losers, which is difficult to do, Hess says. In the '90s, it meant selling stocks in the heat of the bull market and moving money into stodgy bonds. Last year, it meant selling the only funds in your portfolio that hadn't been bulldozed and moving money into a badly beaten-up stock market.

Still, rebalancing produces better long-term returns, with lower risks, Hess says. If you don't have the time or nerve to periodically rebalance, ask your 401(k) administrator if your plan offers automatic rebalancing. More than half of 401(k) plans offer this feature, she says, but fewer than 10% of savers take advantage of it.

2. Watch fees and expenses

Administrative, investment and other fees can make the uphill climb to retirement even steeper.

Unfortunately, most employees don't know how much money fees are draining from their savings, and plans don't make it easy to find out. Most large 401(k) plans are able to negotiate lower fees than you would get investing on your own. But some small companies, lacking the clout that big money offers, are forced to rely on high-cost plan providers.

BrightScope, a California-based start-up, analyzes fees for about 4,500 plans and shows how they rate compared with the plans of other companies in their peer group. The website is free.

While figuring out how much your plan charges for bookkeeping may be difficult, you should be able to look up the expense ratio for the funds in your plan. Look for funds with low expense ratios when building your portfolio, Jones says.

For example, if your 401(k) plan offers an S&P 500 index fund that charges 0.25% and an international fund that charges 1%, "You want a lot less international in your portfolio," he says. Likewise, if the only small- and midcap funds in your plan charge above-average expenses, Jones says, you're better off doing without that sector in your portfolio.

High expenses can wipe out the benefits of diversification, Jones says. You may be able to fill that gap by investing in a reasonably-priced small- or midcap fund in your individual retirement account or taxable portfolio.

3. If you're a hands-off investor, consider a target-date fund

These funds, an increasingly popular 401(k) plan option, relieve you of the responsibility of assembling a portfolio and periodically rebalancing it. Instead, the fund invests in a stock-heavy portfolio when you're young and gradually becomes more conservative as you approach retirement.

But before you invest in a target fund, take a look under the hood, especially if you're nearing retirement. After last year's market bloodbath, some older workers discovered that their target-date funds were still heavily invested in stocks, resulting in stultifying losses. An analysis by Watson Wyatt found that funds designed for workers who are within 10 years of retirement had from 32% to 80% of their assets in stocks.