My guess is that investing in the GOVERNMENT will prove to be the most commonly offered 401(k) option.
Companies are moving to slim down the number of investments offered to workers in their 401(k) plan, in an effort to avoid common investment errors. Will that hurt or help your retirement?
Dec. 7, 2011, 9:15 a.m. EST
Companies trim investment choices in 401(k)s
Some employers are reducing options in investment lineups
By Andrea Coombes, MarketWatch
SAN FRANCISCO (MarketWatch) — How many investment choices are available to you in your 401(k) plan? You may find that number shrinking.
While the trend over the past decade has been for companies to increase the number of investment options in their 401(k)s — the median number of investments companies offer is now 18, up from 10 in 2001, according to consulting firm Aon Hewitt — some companies are switching gears and reducing the number of options, or at least streamlining and simplifying their investment menus.
“The thrill is gone with making every investment option available to people,” said Mark Davis, senior vice president and financial adviser at CapTrust Financial Advisors.
Davis spoke during a MarketWatch Retirement Adviser panel discussion in San Francisco in November. MarketWatch’s Robert Powell hosted the Retirement Adviser event, a discussion with three retirement-plan experts, including Davis, about 401(k) plan trends.
“A lot of our clients are wanting to manage what their participants are exposed to in a much more aggressive way than they have in the past,” Davis said.
Why the move to simplify investment lineups? Some employers fear that workers, overwhelmed with too many choices, are making mistakes. “A lot of investors simply can’t deal with it and would rather not have to make these choices, and need to be sort of constrained a little bit,” Davis said.
Simpler menus can help employers, too. “From the plan sponsor’s point of view, you have fewer funds that you have to monitor and evaluate on an ongoing basis,” said Brad Huss, an attorney and director of Trucker Huss, a San Francisco-based law firm that focuses on employee benefit plans. Huss also participated on MarketWatch’s Retirement Adviser panel.
“It’s a benefit to the plan sponsors [by] making their job a little easier to do the constant monitoring that the law requires them to do,” Huss said.
Still, while a streamlined menu might help reduce investor mistakes, it won’t fix everything. “Simplifying the number of options is a step in the right direction,” said Wei-Yin Hu, also on the Retirement Adviser panel. Hu is director of financial research at Financial Engines, a retirement-plan advisory firm in Palo Alto, Calif.
More: http://www.marketwatch.com/story/companies-trim-investment-choices-in-401ks-2011-12-07
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