When it comes to planning for retirement, more choices don’t always mean better outcomes. In fact, offering too many investment funds in a group retirement plan can overwhelm employees and lead them to freeze up or pick at random. It’s a phenomenon often called “decision paralysis”. Rather than feeling excited by dozens of options, people may wind up making no active choice at all - or making one that doesn’t align with their long-term goals.
Why Too Many Choices Can Backfire
Most employees aren’t seasoned investment pros. Juggling career and personal responsibilities is enough without spending hours dissecting the nuances of dozens of funds. Sun Life’s Designed for Savings 2025 report notes that the average number of investment funds being offered is 11, with an average of only two being held by employees. So, if your plan offers 30 different options, plan members are likely to panic and adopt a “set it and forget it” mindset or spread their contributions across every fund without proper research. Over time, that kind of guesswork can undermine retirement security.
Limiting the number of investment funds not only helps ease your fiduciary responsibility, but it can help employees focus on quality rather than quantity. By giving them fewer, well-chosen options, you’re effectively curating a simpler path to success. This approach can reduce confusion, help employees pick an investment that suits their risk tolerance, and ultimately foster higher plan participation.
The Appeal of Target-Date Funds
One of the easiest ways to streamline investment options is by including a target-date fund in your plan’s lineup and make it your default option. Target-date funds automatically shift their asset allocation to become more conservative as the target date (usually tied to someone’s projected retirement year) draws closer. This means employees who don’t have the time or interest to actively manage their investments still benefit from a professionally managed glide path.
A single target-date fund can replace multiple risk-based funds, simplifying the decision-making process for employees. If they know they plan to retire around 2050, for example, they just select the “2050” fund. It’s a one-and-done choice that adapts over time - no need to constantly reassess their portfolio or remember to rebalance. For many participants, that alone can be a game-changer.
Boosting Participation and Confidence
Streamlining investment choices not only helps members avoid confusion, but also encourages them to enroll in the plan in the first place. With a straightforward set of funds - ideally anchored by a strong default like a target-date option - employees are more likely to sign up and stay the course. They feel more confident about where their money is going, which can lead to fewer dropouts and higher contribution rates over time.
When your plan members see a manageable list of funds, they’re less likely to postpone key decisions, like selecting an asset allocation or updating contribution amounts. Instead of viewing the plan as a minefield of jargon and complexity, they recognize it as an accessible benefit that can truly support their long-term financial well-being.
Finding the Right Balance
Of course, streamlining doesn’t mean offering just one fund and calling it a day. The idea is to strike a balance: enough variety for different risk profiles or personal preferences, but not so many that employees are paralyzed. You might include a target-date suite for the majority who want a set-it-and-forget-it approach, plus a small handful of core funds for those who want more hands-on control. Ultimately, the goal is to provide clarity and structure, making it easy for people to choose a path that fits their comfort level.
Simplify to Engage
A streamlined investment lineup can alleviate guesswork, inspire confidence, and keep your employees engaged with their retirement plan. By ditching the “more is better” mentality and opting for fewer, high-quality choices you can guide your workforce toward smarter, simpler investing habits. When your team feels less stressed about fund selection, they’re likely to see the real value of their retirement benefits - and stick around longer as engaged, loyal employees.
Ready to re-evaluate your investment lineup and keep things simple for your team?
Connect with us today to explore how streamlined options can boost plan participation and improve outcomes for everyone.