Self-directed workplace retirement plans are a key savings vehicle for many people. These include 401(k) plans offered to employees of private businesses, 403(b) plans offered to nonprofit employees; 457(b) plans offered to state and local government workers and the Thrift Savings Plan (TSP) for federal workers. All have nearly identical contribution limits, although withdrawal rules, particularly those related to early withdrawals, vary some. (For more on early withdrawals and penalties, click here .)

For 2010, employees can generally contribute a maximum of $16,500 to these plans, although some companies restrict better paid workers to a lower contribution limit so their 401(k) plans can meet federal “nondiscrimination” tests. In addition, savers who will be 50 or older by the end of 2010 can make $5,500 in “catch-up” contributions, for a maximum of $22,000.

A majority of employers match some portion of employee contributions. According to a 2009 survey by Hewitt Associates. the most common match is 50% of the first 6% of salary an employee saves, and the second most common is 100% of the first 6% of salary an employee tucks away. Matches often vest over three or four years to encourage continued employment with a firm. Contributing enough to your plan to receive the full employer match should be a priority. Make sure you understand how your plan’s match works. For example, federal workers must contribute each pay period throughout the year to receive the maximum match. At some companies, however, you may be able to frontload your contributions early in the year and still receive the full match.

Once you fully understand how your plan works it’s time to turn toward the investment options offered in the plan. Unfortunately, many 401(k) and 403(b) plans don’t offer much. There may seem to be many options, but those options are often expensive, actively traded mutual funds and variable annuities.

Too many investment options in 401(k) and 403 (b) plans are there for the wrong reasons. In some cases, the trustees have picked higher cost funds because they performed well in the last few years. Yet a fund’s past performance does not indicate how the fund will perform in the future. Studies have shown that the best way to predict future performance of an investment is low cost. By keeping costs down, investment firms are able to pass on the majority of the return to investors.

Expense ratios in many 401(k) and 403(b) plans can be obscenely high. Participants who post on www.bogleheads.org often list expense ratios of 1 to 2% on funds in their employers’ plans. A few plans even charge more than 3% when administrative costs are included. These high fees are most often found at small businesses or small nonprofits, where owners or managers may not have the time or expertise to shop around and ferret out hidden fees.

Compare these to the federal government’s TSP, which has a total cost of only 0.028%. A private plan charging 2% would cost an investor $20 per $1,000 invested a year while the TSP plan charges only 28 cents for the same $1,000 investment. The $19.72 difference stays in the TSP account growing and compounding for the benefit of the employee. Over the employee’s investing lifetime, that can make a huge difference in the final account value at retirement. Granted, the federal government is a huge employer and can squeeze costs down, but there is plenty of room for smaller employers to do so, too. (For advice on how to fix your employer’s plan, click here. For advice on how small business owners can get a better deal for their workers, click here .)

Many plans offer an overwhelming number of fund options. Sorting through multiple funds in multiple asset classes can be daunting and confusing. To make this easier, start your search by comparing fund expense ratios. Listed below is a 401(k) plan that was posted on the www.bogleheads.org forum recently with the expense ratio of each