Fees might get all the headlines, but a recent survey ranks them last when it comes to lack of retirement readiness. “401(K)/IRA Holdings in 2013: An Update from the SCF,” by Alicia Munnell, the director of the Center for Retirement Research at Boston College, cites government data that identifies three factors more costly than fees.

The report focuses on what it calls the “missing $273,000.” This represents the difference between what we should expect the average 401(k) account balance to be and what it really is. Munnell broke down the difference into four distinct components. While she does maintain “plan sponsors clearly have room for improvement in the area of fees,” the data shows fees, based on the average mutual fund expense ratio, accounts for only $59,000 of the missing $273,000. Mind you, no one expects to get something for nothing, so some amount of fees must exist. More importantly, for all the bad press (much of it well deserved), three elements—all unnecessary—produce significantly more damage to retirement readiness than fees.

What Munnell calls “immature system” accounts for $65,000 of the missing $273,000. This phrase can best be described as people not beginning to save at an early age. The “immature” part presumably refers to the early years of the 401(k) vehicle. Employees were just getting their feet wet with the 401(k) concept and might have delayed participating as a result.

“Intermittent contributions” make up $71,000 of the missing $273,000. We shouldn't point to a lack of disciplined savings as the sole reason for employees taking breaks in contributing to the plan or in reducing their annual contribution. These gaps and reductions can naturally occur as a result of job changes and unexpected expenses. One of the major culprits in causing this gap, as well as delaying initial participation, is the typical one-year waiting period for eligibility.

By far, “leakage” is the most critical detriment to retirement readiness. It eats up an alarming $78,000—that's almost 30 percent—of the missing $273,000. Leakage refers to loans, hardship allowances, and early withdrawals. While, unlike fees, leakage is not necessarily a given, it remains difficult to prevent them. Clearly, plans can be designed to prohibit loans and withdrawals, but this might discourage saving.

This does, however, give us a clue on how to begin to mitigate these factors. It all comes down to improving plan design. Plan sponsors and service providers need to take a serious look at how the plan document addresses: 1) the employee's eligibility requirements; 2) the company's matching strategy; 3) loan provisions; and, 4) the permissibility of hardship and early withdrawals.

And what about investments? You might be interested to know that Munnell was one of the authors of a 2012 Wharton study that revealed investment strategy may be less important than investment advisors might be willing to admit. It turns out, the difference between the average investment allocation and the optimal asset allocation can be made up for simply by working four more months.