Father of the 401(K) Ted Benna Disturbed by Corporate Greed in Workplace Retirement Plans

In the world of retirement savings, Ted Benna is a name that holds significant weight. Known as the “father of the 401(k),” Benna revolutionized the popular investment vehicle back in 1978 with a design that is still widely used today. However, despite the widespread adoption and popularity of the 401(k), Benna recently expressed his concerns about the direction in which workplace retirement plans are heading.

One of Benna’s main grievances is the rise in administrative fees charged by employers. Originally, employers were supposed to cover all administrative fees associated with 401(k) plans. However, Benna has observed a troubling trend of “greedy” employers passing on high fees to employees, which can have a significant impact on investment returns over time. With fees as high as 2.75%, the value of a portfolio can be greatly diminished, highlighting the importance of understanding and managing fees associated with retirement plans.

To combat high fees, Benna recommends first understanding the types of fees being charged, which include administrative, service, and investment fees. While administrative fees are typically fixed, service fees can be minimized by avoiding unnecessary actions, such as early withdrawals. Investment fees, on the other hand, can be reduced by opting for funds with lower fees, such as passive index funds. If your plan does not offer these options, you may want to explore a self-directed 401(k) plan for more investment choices.

Another concern raised by Benna is the temptation to withdraw the total amount from a 401(k) when switching employers. While this may seem like a quick fix, it can significantly impact your future nest egg. Instead, Benna advises considering other options, such as leaving the funds where they are, rolling them into a new employer’s plan, or transferring them to a traditional or Roth IRA.

Despite his reservations, Benna acknowledges that 401(k) plans remain a powerful tool for achieving financial security in retirement. By being proactive in managing fees and resisting the urge to withdraw funds prematurely, individuals can maximize the benefits of their retirement savings plan.

In conclusion, the concerns raised by the “father of the 401(k)” serve as a reminder of the importance of staying informed and proactive when it comes to managing your retirement savings. By understanding and addressing potential pitfalls, individuals can ensure that their hard-earned money is working for them in the best possible way.