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What a difference a percent makes. A combined attention to mutual fund quality and mutual fund costs can increase the probability of gaining that extra 1 or 2 percent annual return on your portfolio overall.

Why does such a seemingly small difference in rate of return become so important? It's the magic of compound interest over a sustained period of time that adds hundreds of thousands of extra dollars for each additional percentage point.

A $10,000 per year contribution for 30 years at 7.5 percent accumulates to $1,033,994. At 10 percent, the final number is $1,644,940. It doesn't take much effort or knowledge to increase the probability of realizing the bigger number.

First, there is mutual fund quality. Morningstar continues to be the premier ranking service for those of us looking for a comprehensive single source of information and the ability to compare some 12,000 available mutual funds.

In a recent New York Times column by Mark Hulbert, the investment newsletter expert pointed out the research showing that those famous star ratings do seem to mean something.

Since 2002, the rankings have been calculated separately for each of 48 different mutual fund categories.

They now represent a much more effective delineation of quality than was the case back when all stock funds were lumped together.

In those days, an energy fund that might have outperformed the entire rest of the stock market would get five stars even if it happened to be a mediocre performer in the energy fund category. Today, it would be ranked only against its peers and might receive only a three-star rating.

According to Morningstar's own study, the average domestic equity fund with a five-star rating earned a 10.1 percent annualized return for the three years ended in June \2005.

The average one-star fund had a return of 8.1 percent. Morningstar might not be perfect, but it represents one of our best efforts to identify quality. A separate study at Pace University confirmed similar results.

Then there is cost. Both Money and Forbes magazines, in their most recent issues, published mirror image articles regarding what they called "Retirement Rip-off" or "How They Chip Away Your 401(k)."

I thought my famous eight-page Money article in 1998 on the "Butler Index" had solved that problem once and for all, but like a bad penny, excessive fees just keep coming back.

A typical 401(k) plan at a small company can easily be charging way too much to participants, and the information about those charges is buried in the fine print. Because nobody ever sees a bill or has to write a check, there are never any complaints -- or lawsuits -- until just recently.

Caterpillar is one of several large companies being sued in a large class action suit regarding fees that were charged to 401(k) plan participants. Maybe this will be the shot across the bow that wakes up the financial community to their obligations.

At the same time, several major brokerage firms have settled lawsuits stemming from their continuing to sell "B shares," which charged high commissions, when the same funds could be sold at a less expensive share class when investors had reached dollar amounts or "breakpoints" qualifying them for the cheaper shares.

Brokers, legally committed to something called "best execution," had routinely ignored the law in an effort to generate more revenue and to probably win some sales contest.

All too often, 401(k) plans are operated as the years go by with little or no attention to participant costs.

In the early years, a percentage of assets amounts to little in the way of dollars, as in, 10 percent of nothing is nothing.

Today, however, these plans have accumulated to huge sums -- $2.9 trillion. Some vendors are charging as much as 2.5 percent per year to participants on this money. At this rate, a gross investment return of 10 percent nets only 7.5 percent to the plan participant. In the example up in the first paragraph, this costs the participant a mere $500,000 of what could have been the retirement benefit.

Couple this cost with a collection of mutual funds that struggle to earn even three stars because it is too cumbersome to bother to make a change. Now, you have an additional 2 percent drag from inferior performance.

It's a wonder some of these participants have any money at all beyond what they contributed to the plan. They may be lucky to have even that much.

The message is simple. Take the steps to demand a cost-effective plan with a continually updated selection of high-quality funds. The reward for your effort could be an extra million to support that eccentric personal retirement lifestyle you have in mind.