Happy 30th, 401(k)

The 401(k) plan turns 30 years old this year, and while the plan’s arguable creator says he never intended these plans to replace pensions, that’s what’s happened.

Ted Benna says that while these plans have their flaws, they could still work as a pension replacement IF: workers started early and set aside 10 percent of pay; investors get historical returns from stocks and bonds; they don’t take the money out before retirement; and workers use some or all of the money at retirement to buy an annuity that guarantees an income stream for life.

This is important, as according to the Employee Benefit Research Institute, the average 401(k) balance of those in their ’60s is only $144,000, not enough to retire on.

Benna told the Baltimore Sun he doesn’t like seeing pensions vanish.

“It’s not the right thing for national retirement security. We are better off having both types of plans,” he said.

But of course, having something in your 401(k) rather than nothing is the preferred way to go: “Individuals who are retired and have $150,000 or $200,000 in their 401(k) aren’t saying, ‘I wish I hadn’t done it.'”