Garco wrote:Rick, I think I understand (and believe in) the theory. As a practical matter, however, many of us have a limited range of choices in our 401k's.
Indeed, dealing with the choices in one's plan can be a major roadblock in optimizing retirement savings. With the CA Savings Plus Program (401k and 457b plans for certain CA state employees), one doesn't even have the luxury of choosing between value and growth. Instead, one has the choice of an index fund or a blend fund for each size. For example, there is no large cap value fund or large cap growth fund, just the large cap fund and the large cap index fund. The large cap fund is 30% value, 30% growth and 40% index. Small cap fund and mid cap fund are also split between value, growth, and index, although the exact composition is harder to find since the state switched website providers (the new website no longer provides the names of the underlying funds, just the companies providing the funds).
There is of course the self-directed brokerage account option, but they've not made it easy to take advantage of that option. I can't even find the enrollment form on the new website. The instructions on the page introducing the brokerage account are incorrect, although if one logs out and finds the brochure for the option under the public website, it does appear to have the correct instructions (judging purely by how counter-intuitive the instructions are). Additionally, one cannot find out the investment options available in the brokerage account without creating a brokerage account, although this is a rather common practice.