What kind of return can we expect from our 401(k)?

Five golden eggs

What kind of annual return you can realistically expect from your 401(k) retirement plan?

We asked Christine Benz, director of personal finance for Morningstar, a respected provider of independent investment research.

She said 6% a year is a good conservative estimate to use for planning purposes.

Of course, your actual return depends on the plan you have, the fees you pay and the performance of the stock and bond markets.

But 6% is not unrealistic and a good figure to use in judging how well your account is doing.

When we looked at 10 of the biggest mutual funds — funds that are widely available in 401(k) plans — we found that most averaged more than that over the past five years.

That's why 401(k) plans are one of the best options you have to save and build financial security right now.

"What you don't want to do is not contribute or let money sit in a savings account earning nothing," Benz says.

Brightscope, a financial information company that provides analytics on investments and retirement plans, provided us with this list of mutual funds.

Returns and Expenses

The Biggest Mutual Funds Commonly Found In 401(k) Plans

Mutual Fund Ticker Symbol Description Average Annual 5-Year Return Management Expenses
PIMCO Total Return PTTRX World's largest fund holds intermediate-term, investment-grade bonds 7.96% 0.46%
Vanguard Institutional Index VINIX Large-blend domestic stock fund that tracks performance of the S&P 500 10.04% 0.04%
American Funds EuroPacific Growth AEPGX Foreign large-cap blend fund with stocks in European and Pacific rim companies. 7.15% 0.86%
Fidelity Contrafund FCNTX Large-cap growth fund that seeks capital appreciation 11.12% 0.74%
Vanguard Total Bond Market Index VBMFX Intermediate-term bond fund 5.22% 0.20%
Vanguard 500 Index VFIAX Very low-cost index fund that tracks the performance of the S&P 500 10.03% 0.50%
Fidelity Spartan 500 Index FUSEX Low-cost large-blend fund with 80% of assets tracking the S&P 500 9.96% 0.10%
Vanguard Wellington VWELX Moderate allocation fund with 60% of assets in dividend-paying stocks 7.61% 0.25%
Fidelity Growth Company FDGRX Large-cap growth fund that seeks capital appreciation 14.64% 0.90%
SSgA S&P 500 Index SVSPX Low-cost index fund that tracks the performance of the S&P 500 9.89% 0.18%
5-year returns as of Oct. 10, 2013

Ideally, you'll want a mix of stocks and bonds in your plan that you can get through a target-date or balanced fund.

One of the most common balanced funds found in 401(k) plans is the Vanguard Wellington, which holds roughly 60% of its assets in stocks and the other 40% in bonds.

In Wellington's case, it owns a lot of large-cap stocks such as Exxon Mobil, Verizon, Wells Fargo & Co., Microsoft and Merck, and a variety of government and corporate bonds, making it a decent pick for a single-fund 401(k) plan.

Its expense radio is a mere 0.25%, and over the past five years it has produced a load-adjusted return of 7.61%.

As the world's largest fund, the PIMCO Total Return is another option you're likely to find in your 401(k) plan.

It holds intermediate-term, investment-grade bonds and seeks to maximize total return while preserving capital.

Over the past 10 years, it has produced a 6.22% annualized return.

It's strictly a bond fund, so you'd want to pair it with an equities fund.

Benz says you can also easily create your own balanced fund in most plans.

If you wanted a traditional 60/40 mix, you would simply direct 60% of your money to a stock fund and 40% to a bond fund. Or you could be more aggressive and use a 70/30 mix.

"It's not very difficult to create a diversified and balanced portfolio with the funds in most plans," Benz says. "It could be the next-best option for someone trying to find their way in a 401(k) plan without a lot of information."

A couple of solid equities index funds you're likely to find are the Vanguard Institutional Index Fund (VINIX) and the Fidelity Spartan 500 Index.

Both are low-cost funds designed to track the performance of the S&P 500 and give you exposure to the broad stock market.

Over the past five years, both funds have averaged a 7% return.

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Other popular bond and equities funds, including the Fidelity Contrafund, Vanguard Total Bond Market Index and Vanguard 500 Index, have all produced great returns in recent years.

We should note that past performance is not an indicator of future returns. Just because a fund averaged a 7% return over the past 10 years doesn't mean will do the same over the next 10 years.

But in the absence of other complex measures, it's one of the two most common factors savers use to pick mutual funds for their 401(k) plans.

And as the chart shows, savers who had these funds in their retirement accounts over the past five years did pretty well.

The second factor you should pay careful attention to are expenses.

In a 401(k) plan, you'll generally have two types of expenses: expenses for administration of the plan itself and management expenses for each of the funds in your plan.

You really don't have much control over plan administration fees — that's negotiated by your employer when they hire the plan administrator.

But you can control management expenses by choosing the funds with the lowest fees.

Consider that if you invested $5,000 annually for 30 years and averaged a 6% return with a 1% management fee, you'd pay $71,000 in fees during that time.

But if you earned the same return from a fund with a 0.25% management fee, you'd only have paid $19,000.

The 0.75 percentage points difference would put an extra $50,000 in your pocket.

As you can see from the chart, there are lots of funds that earned average annual returns of 9%, or even 10%, over the past five years with expenses well under 1% a year.

That's the combination you want to look for — a history of solid returns with low expenses.

Those are the mutual funds that can help your retirement account grow.