If you’re frustrated with your 401(k) investments, this might not be a “you” problem. It might be a plan problem.

Hey—quick thing. If you’re a 401(k) participant, I can’t give you specific investment advice unless your employer has hired me to do so.  If you call or email me there’s not a whole lot I can do for you, but introduce me to your HR rep or other decision maker and we can change that.

But if you’re confused, overwhelmed, or wondering why your options feel like leftovers from a discount buffet—you’re not crazy. You’re stuck with a plan that might have been poorly designed.

And if you’re an HR lead, CFO, or decision maker reading this… it’s time we talk.

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The Real Reason So Many 401(k) Menus Suck

Well, this is awkward.  The market has been on an absolute tear for the last decade, so you may not think your investments stink, but there’s a good chance you missed out on even better returns.

And here’s the thing about investing in a 401(k) plan: it’s boring. It should be.

Does it have to be? Not exactly. Technically, you can invest in almost anything—gold, classic cars, paintings. I once worked on a plan that held rare books. But the rules around that kind of investing are a minefield, and generally speaking, a terrible idea.

So what actually happens in most plans?

• Old school thinking: throw a ton of funds at employees and hope they figure it out.
• New school: strip it down to target date funds, maybe throw in a lifestyle model or two (aggressive, moderate, conservative, etc.), and call it a day.

Some providers take the idea of a QDIA to the extreme—only letting you invest in the default fund. And honestly, there’s some logic to it. Research shows that keeping things simple helps most people avoid emotional investing mistakes.

What about the people who don’t even know what a mutual fund is? They need:

• Professional advice available
• A curated fund menu that doesn’t induce paralysis by analysis

There’s even a behavioral economics study about jam and jelly displays—too many options actually make people less likely to choose anything. Check out an article about it here.

Here’s my 401(k) investing philosophy in a nutshell:

• Good fund families
• Low cost
• A mix of active and passive strategies
• Solid target date series
• Good results relative to peers and indexes
• If you use active management, make sure the manager eats their own cooking (its amazing how many don’t invest a dime of their own money in funds they manage)

So what’s the formula?

• Pick a good QDIA
• Default people into it
• Explain why
• Offer a few other options—maybe even one or two “sexy” ones like a sector fund
• Don’t overload the menu
• Avoid proprietary garbage
• Keep it simple

This is retirement money. We’re playing the long game. Think decades, not quarters. Your job as a plan sponsor isn’t to help people hit home runs. It’s to help them keep showing up, take the walk if they have to and steadily run the bases.

Most 401(k) investment lineups weren’t built by investment experts. They were built by:

• A wholesaler trying to hit a sales quota (just put in the cheapest ones available!)
• An advisor who doesn’t specialize in retirement plans
• A cookie-cutter setup based on what was easiest to sell

The result?

• High-fee, actively managed funds with outdated strategies
• Limited diversification
• Target date funds that look good on paper but underperform in practice
• Fund overlap, proprietary funds or add-on services like managed accounts that may not really do you any good

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Participants Blame Themselves. That’s a Problem. If your employees are saying:

• “I don’t know what to pick”
• “Everything looks the same”
• “I guess I’ll just pick the target date fund”

…that’s not a literacy issue. That’s a plan design issue.

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The Employer’s Blind Spot Here’s another issue that rarely gets talked about: advisor turnover. The person who set up your plan may not be the one still servicing it—and even if they are, that doesn’t guarantee they know what they’re doing. A huge number of advisors rotate out of roles, change firms, or simply lose interest once the plan is up and running. In fact, surveys show that more than half of clients left their advisors in the past year, and over a third of financial advisors are expected to retire within the next decade. If your plan was built by someone who isn’t around anymore—or worse, never specialized in this space to begin with—how confident are you in what was left behind?

Most plans were set up years ago and haven’t been revisited. The original advisor might not even be involved anymore. But the fund menu, fees, and participant outcomes? They’re still on you.

If your plan:

• Hasn’t had a lineup review in 3+ years
• Was built by someone who isn’t a 401(k) specialist
• Has employees disengaged or frustrated

Then the issue isn’t just investments. It’s everything upstream from them.

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How I Can Help I work with small to mid-sized companies to:

• Review fund menus for performance, cost, and relevance
• Benchmark your plan against industry best practices
• Fix outdated plan structures
• Rebuild participant trust

 

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Bottom Line: You don’t need a new record keeper. You need a better process. And that starts with someone who actually knows how to build one.

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This content is for informational purposes only and does not constitute investment advice for individual participants.