Last year I had a dialogue with a number of 401(k) advisers about what they thought was the "perfect" number of investment options to plan sponsors should place on their 401(k) menus (see "Professional Advisors Sound Off on Ideal Number of 401(k) Plan Options"). At one point in the conversation, one of the advisers jokingly said, "One." We laughed because it was true, but moved on, visions of 404(c) dancing in our heads and all that.
Perhaps the laugh was on us. It turns out more and more 401(k) investors are deciding to go back to the future and select the "one portfolio" option on their plan's menu (see "Why 401(k) Plan Sponsors (and Investors) are Going Back to the Future"). In doing so, they've come to solve two debilitating problems 401(k) investors have commonly faced.
First, the proliferation of choices has led to many a 401(k) investor shouting "d'oh!" as in a deer, as in a deer frozen by headlights. Researchers in behavioral finance call this the paralysis of choice.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
