Are Too Many Choices Costing 401(k) Holders?

via Wall Street Journal

In investing, choice usually is a good thing. But new research suggests that having too many choices in a 401(k) retirement plan could be costly for participants.

Researchers studied a 401(k)-type plan that reduced the number of mutual funds it offered by close to half. They found that investors who were forced to shift their money out of the funds being eliminated from the plan tended to move into funds with lower fees—even though the funds available after the plan was streamlined had almost exactly the same range of fees as the menu of funds before the choices were reduced.

The estimated savings averaged more than $9,400 over a 20-year period for each participant who had to change investments, or $470 a year, says a report published last month by the National Bureau of Economic Research. (NBER is the organization known for tracking economic cycles, including declaring recessions.)

Read the full article here

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About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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