Bad news for anyone who works for a living: Chances are, you’re gonna be working even longer.

Sure, things are tough all over, but this little tidbit from Charles Schwab is particularly depressing (via Reuters).

“A quarter of U.S. employers have eliminated matching contributions to employee 401(k) retirement plans since September to save money amid the economy's downturn, according to research released on Monday.”

As if investors didn’t have things bad enough. As someone who started retirement savings in earnest back in the 1980s, I know my own personal retirement account investment performance has looked an awful lot like this all-too-familiar chart:

No, that’s not really my portfolio — it’s the S&P 500. But I was deep into indexing before I even had a full-time job, much less a 401(k), and I rode that first drop in ’87 right down to the ground in my trusty Vanguard S&P 500 Index fund.

But I was lucky. I managed to contribute during the course of the 1990s, I diversified a little, and for most of that time, I had a generous employer match. So while my investment performance may not have blown the doors off anyone’s Bugatti, the last two resets to 1996 levels of investment performance still put me way ahead of where I’d be if I’d been on my own.

Perhaps the real surprise is that the idea of the “employer match” has stuck around as long as it has. The modern retirement plan — the 401(k) Defined Contribution plan, and its 403(b) and 457 brethren — was adopted like gangbusters in the ‘80s and ‘90s almost entirely to shift retirement expenses off the books of corporate America.

Indeed, it was ultimately the use of relatively expensive mutual funds that really juiced the market: With the right stable of mutual funds, all of the costs of managing an employee retirement system can be paid for through shareholder servicing and 12(b)1 fees from the plan investments. The modern 401(k) is — for employers — one of the only free lunches they’ll ever get.

Of course, this is bad news for investors. It’s just one more headwind we have to fight to keep our heads above water.

And it would seem that the writing is on the wall for employer matches as well, making that lunch even freer for plan sponsors. From the Schwab report: In 2007, 78% of firms offered a match of some kind in their 401(k). In 2008, that number fell to 70%. When we close 2009, anyone want to guess how low that number drops?

And does anyone really think these kinds of benefit reductions are really temporary? Just one more reason for investors to realize we really are out here in the cold alone, and if we aren’t watching our bottom lines, nobody else will.

A Note on ETFs:

Interestingly, ETFs are putting even more pressure on plan sponsors. By stripping index investing down to its rawest stalks, ETFs are a tremendous educational tool. And for an ETF investor used to paying 7 basis points for their equity exposure, stomaching a big fat expense ratio on the same basic strategy in your company’s retirement plan can be tough. To date, best estimates are that only 5% or so of 401(k) plan assets are in ETFs, and that through brokerage windows. There’s a reason it’s tough sailing for ETFs — paying a commission for your contribution every 2 weeks over a few ETFs would kill your returns.

There are plans to mitigate this problem — collective buying platforms from third-party record-keeping systems like the unfortunately named “Invest n Retire” company in Portland, or a proprietary system from ETF sponsor WisdomTree. But since ETFs would actually lay bare the cost of 401(k)s even more, I’m not holding my breath.

You can read more about whether ETFs are ready for prime time in 401(k) plans here and the latest in ETF rollouts along these lines, here. Also, be sure to check last fall's Journal of Indexes story about the unlikely ETF/401(k) marriage here.