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Investing Blog Roundup: More Funds in 401(k) Leads to Better Outcomes

I hope you are all safe and as happy and healthy as it is possible for you to be.

For years, the conventional wisdom regarding 401(k) and other similar workplace retirement plans is that the plan shouldn’t have “too many” investment options. Having a lot of options causes employees to experience “choice overload,” which can lead to worse decisions.

I recently came across a piece of research from David Blanchett and Michael Finke (summary article below) that found exactly the opposite. Having a lot of choices causes more employees to accept the default investment option (possibly because of the feared choice overload). But these days (i.e., post-Pension Protection Act of 2006), that’s a good thing because more and more employers are using target-date funds as the default option.

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