Beware of Hidden Fund Costs

Seigerman said the invisible costs generated by assets flowing in and out of funds can easily eat into returns by 0.5%, which could mean the difference between meeting your retirement goals or not.

For example, consider a 50-year-old couple with $2 million in invested assets who want to retire in 10 years and receive a monthly income of $10,000. They can do this if they invest $15,000 a month and receive an annual return of 7% on their portfolio.

But if their returns fell by 0.5% to 6.5%, the couple would have to work until they are 64.2 years old to get the same post-retirement income. If performance is eroded even more to 6%, they would have to put off retirement until age 66.8.

While it can be tough to avoid many of these costs, there are some ways to avoid funds that may have hidden fees. Start off with the information that funds are required to disclose. If a fund consistently holds large amounts of cash, that may be an indication that they are not putting their money to work effectively.

And even though the turnover that funds report isn't the same as the total number of their transactions, it can still provide a sense of how much a manager is trading compared with his or her peers. (The number of transactions can vary greatly depending on the strategy employed, so be sure to compare funds with similar strategies.)