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We all know that 401(k)s/403(b)s typically have fewer options to invest in compared to IRAs and traditional brokerage accounts (unless the 401(k)/403(b) allows a "self-directed brokerage account" option that typically costs the investor high fees.) For instance, my 403(b) with TIAA at a decently-sized university offers only a single passively-managed index fund and a handful of activiely-managed funds. My question is: why? What incentives do plan administrators have to keep their plans' investment selections so small?

My monkey brain intuition would tell me that if anything, a large pool of people participating in an employer-sponsored retirement plan should make it cheaper than an IRA to offer a large investment selection. Similar to how employer-sponsored health insurance is cheaper than individual health insurance. Obviously, that reasoning is wrong. But why?



Submitted December 02, 2023 at 12:44AM by ProtoSpaceTime https://ift.tt/6kKwfqU

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