Creator of the 401(k): “This Monster is Out of Control”

In 1980, Ted Benna threaded a loophole in the U.S. tax code in order to increase the retirement savings of Americans.

We’ve come to know his financial invention as the 401(k) plan.

Since then, millions of people have saved billions of dollars into their employer sponsored 401(k)’s. But often with disastrous results. 

As you may have noticed, the 401(k) hasn’t delivered anywhere close to where it has been hyped to perform.

In fact, in a recent article, Benna does an about face on the very 401(k) he helped to make so popular. In his words, “I would blow up the system and restart with something totally different.”

Some other key passages from Benna I want to highlight.

  • The original 401(k) plans had only two options: a guaranteed fund and an equity fund. Benna said that the original 401(k) plans “could be explained in one minute.”
  • As more companies incorporated 401(k) plans into their benefits packages, plans became more complicated as more people made specific investment requests.
  • More investment options required employees to be better educated on their plans. But attempts to educate employees on them haven’t been fruitful. “We’re throwing tons of money away trying to teach participants how to become skilled investors – we said, we are going to make people smart and savvy enough to make the right investment decisions, but it just hasn’t worked.”

Benna’s criticisms aren’t just accurate, they hit home.

Have you ever felt that your 401(k) plan is no longer user friendly? More importantly, have you ever felt that it isn’t saving you the money you originally thought it would?

You can blame the stock market and downtrodden economy all you want, but the actual performance of a 401(k) plan isn’t the point.

It’s the people whose names they are under.

My point is that better retirement planning is something everyone will say they need, but only a few have the ambition to take an active role in seeing a success plan through. In other words, most 401(k) fund owners would rather ride in the car than drive it.

So if 401(k) plans are flawed because of their performance and because of investors’ lack of education about them, this is a golden opportunity for you.

Not only can you provide an alternative financial solution, you also provide an alternative financial solution that is easier to use and understand than a 401(k).

This is a win-win situation for you and them.

One such solution is an overfunded dividend paying whole life insurance plan, which is simpler, offers guarantees, is liquid, doesn’t rely on stock market gains, and is hands down more beneficial to a family’s retirement plans.

In addition, you can educate prospects and clients on life insurance via regular one-on-one consultations that provide you a steady revenue stream.

The trick though, is doing what 401(k) consultants and educators can’t do: educate!

The best among us can pare down a financial plan’s important concepts and benefits.

Focus on the outcome of these benefits. Make them tangible. Put them in dollar figures, and show what those dollar figures can afford.

Take this tactic a step further that show how these benefits solve their stated problem, fulfill their stated desires and coincide with their fiscal beliefs.

Finally, show people how much of a better solution this is to a standard 401(k) plan.


Be valuable.

John McCarthy
Managing Editor,

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Brian J. Kay, Executive Director, Leads4Insurance
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