Behavioral finance has taught us a lot in recent years about how people make decisions. Just as importantly, it has taught us how plan sponsors can help participants make better decisions while still providing them with choices. However, providing people with too many choices can overwhelm them and lead to decision paralysis.
On my first day working part-time in a men’s clothing store as a teenager, the owner looked me in the eye and told me to never show more than three ties to a customer. He explained I could show as many ties as needed to make the sale, but never have more than three on the counter at a time. More than that, and the customer would likely have trouble making a decision. In recent years, this type of test has been tried under controlled conditions by academics. While three may or may not be optimal, limiting choices in decision making has been proven effective.
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