The world is filled with choice. There are five shelves of toothpaste at the grocery store, two thousand paint colors to consider when redecorating, and hundreds of channels to choose from every time we turn on the television. On a daily basis, according to researchers at Cornell University, people make an average of 226.7 decisions about food alone.1

Investing for retirement is no different. Retirement plan participants are faced with what can be an overwhelming number of choices that could have a major impact on their lives.

The reality is that decisions are tiring. Bit by bit, even the simplest ones add up, sapping our mental energy. And though we’re not typically aware of it, as we mentally wear out, the quality of our decisions worsens.

I first heard about this concept from Kathleen Vohs, a professor at the University of Minnesota. She’s studied decision-making extensively. Her work is fascinating, and highly applicable to the retirement business and our never-ending quest to help participants save more.

What Professor Vohs has learned is our brains suffer mental fatigue from decision-making, which is similar to the physical fatigue we might feel after an hour at the gym or a Saturday of yard work. Which is why, after a long day at the office, we might go home and find ourselves choosing potato chips instead of a salad, or deciding to slump on the couch and watch television instead of working out. Not decision-making at its best.

Decision fatigue also causes our brains to create shortcuts that make life easier. Let’s say we’re looking for a new television. We might decide that only one dimension really matters, maybe its price, or size, or brand name.

The cost of complexity

Overcomplexity, and the decision fatigue that comes with it, has real societal implications. According to Cass Sunstein, director of the Program on Behavioral Economics and Public Policy at Harvard Law School, “Numerous seniors have ended up in the wrong prescription drug plan, and therefore lost a lot of money, just because the number of choices is large and selection of the right plan is too hard.”

And it isn’t simply a matter of age. In his book Simpler: The Future of Government, Sunstein also notes that “Thousands of students have not received financial aid, and hence have not been able to go to college, simply because financial aid forms have been too long and complicated.”

But complex doesn’t have to be confusing. I would argue that the more complex the issue, the greater the obligation of the provider to make it easy to understand. And let’s face it, retirement planning and investments are not topics most people feel well-versed to discuss. Fortunately, there are ways to simplify financial decisions for plan participants.

Make it automatic

One way to combat decision fatigue is to take away the need for a decision in the first place. Make a choice “automatic.” This has worked particularly well in the 401(k) and 403(b) space. Among retirement plans that rely on voluntary enrollment, the average participation rate was 63% at the end of 2016. But when we reframe the decision—a worker is automatically enrolled but retains the right to stop making paycheck contributions at any time—the average plan participation rate shot to 90%.2

The same is true for investing. In 2016, 81% of new plan enrollees were invested in a single target-date fund (TDF). The use of TDFs as qualified default investment alternatives (QDIAs) has greatly improved asset allocation among plan participants.2 The percentage of participants holding broadly diversified portfolios rose to 71% in 2016 compared with 42% in 2006. At the same time, the percentage of investors owning extreme no-stock or all-stock portfolios plummeted by two-thirds, from 32% in 2006 to 10% in 2016.2

Outsource it

When faced with complex financial decisions, many simply outsource the decision. They call on financial advisors to help them navigate the terrain. Often there is a language barrier, as unfamiliar tax and finance terms need to be explained. Or the advisor may need to reassure clients who are feeling anxious or fearful of making a mistake with a decision they don’t fully understand.

These conversations can be helpful when they help keep a client focused on a long-term plan. “Advisors . . . can act as emotional circuit breakers by circumventing clients’ tendencies to chase returns or run for cover in emotionally charged markets,” notes a recent Vanguard white paper.3 This kind of behavioral coaching, when it results in a disciplined, long-term approach to finances, can be the single most valuable service that an advisor provides to clients.

A better way?

Of course, not all decisions can be automated or outsourced. This is why Vanguard continually experiments, testing and learning what best motivates participants to take positive actions. We used to believe that an in-depth exploration of a topic could be persuasive through sheer force of logic. Over time we’ve learned that most participants don’t have the time or the willingness to go deep. Given a long primer on investing, many 401(k) investors will set it aside for later, which usually means never.

So we’ve been learning from behavioral finance experts and leading academics to implement things like “nudges,” framing techniques, and peer comparisons, that favor getting it done with one click rather than overloading recipients with information. There’s no deliberation, no variety of options to weigh, or complex information to review. No decision fatigue. Everything is boiled down to a single binary decision: Yes or no?

We rigorously test these communications in controlled experiments. What we’ve seen is tremendous. Retirement plan investors who received a personalized “Save More” message with a one-click option to take action on their Vanguard account homepage were 139% more likely to increase their savings rate than those who didn’t get the savings nudge.

A different message, sent to participants who weren’t saving enough to obtain their employer’s full matching contributions, had an even stronger impact. Compared to the control, this “Meet Your Match” message caused 159% more participants to save more.4

Instead of trying to change who participants are, and expecting that they’ll suddenly become interested in spending their weekends educating themselves about investments, we’re taking a different approach. Recognizing participants are busy people, living busy lives, we’re designing experiences that are clear, personal, and easy to act on. Science has proven that decisions are tiring. We don’t think anyone should have to furrow their brow just to understand their retirement account.

1 Source: Wansink, Brian and Jeffery Sobal (2007), “Mindless Eating: The 200 Daily Food Decisions We Overlook,” Environment and Behavior, 39:1, 106–123.

2 Source: How America Saves 2017: A report on Vanguard 2016 defined contribution plan data.

3 Source: Putting a value on your value: Quantifying Vanguard Advisors Alpha, Francis M. Kinniry Jr., CFA, Colleen M. Jaconetti, CPA, CFP®, Michael A. DiJoseph, CFA, Yan Zilbering, and Donald G. Bennyhoff, CFA. Vanguard, September 2016.

4 Source: Vanguard, 2016.


  • All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
  • Diversification does not ensure a profit or protect against a loss.
  • Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the work force. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target date funds is not guaranteed at any time, including on or after the target date.