Streamlining 401(k)s

Investing in 401(k)s just keeps getting more complicated, as investors have to puzzle over an ever-growing number of fund choices.

The average number of investment options in a 401(k) now stands at 13, according to the Profit Sharing/401(k) Council of America, up from about seven in 1996. But while all that choice may be great in theory, the reality is that it has left many investors bewildered.

Most react by dumping their money into only one or two funds. "Regardless of the fund menu, 50% of the people are picking two funds or less," says Dallas-based pension consultant Brooks Hamilton, who noticed the trend in an ongoing examination of 12 large 401(k) plans. ...