A report from the Boston College Center for Retirement Research shows that the returns investors earn in 401(k)s are at least one percentage point lower each year than the returns they would earn in a defined benefit pension plan.

The report is based on the analysis of 5,000 companies that offered both defined contribution and defined benefit plans between 1988 and 2004. During that period, the defined benefit plans returned an average 10.7% a year, compared to 9.7% in 401(k)s and a mere 3.8% in IRAs.

"This outcome occurred despite the fact that 401(k) plans held a higher portion of their assets in equities during the bull market of the 1990s," the authors noted. "Part of the explanation may rest with higher fees, which are deducted before returns are reported to participants."

They also pointed out that the fact that IRAs produce even lower returns portends trouble, due to the tremendous amount of money being rolled over into these accounts.

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