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One of my most controversial opinions is that the 401(k) is one of the great financial inventions of the 20th century. It is not a view shared by many people — including, apparently, the inventor himself, Ted Benna, who argues that the 401(k) has mainly benefited the wealthy.
The opposite is true: The 401(k) has been one of the most effective tools for widespread wealth creation ever devised. Yes, it has weaknesses, but it may be the best such system in the world.
Benna, the so-called “father of the 401(k),” says these plans have become too complex and mostly benefit wealthier savers. He worries that low-income people don’t participate because they either don’t have access to an account, or can’t afford to contribute if they do. It is also true that some rich people use 401(k)s and other retirement accounts to lower their tax bills.
Continue reading the entire piece here at Bloomberg (Paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute, a contributing editor of City Journal.