recent interview w/ Ted Benna - inventor of 401(k)

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AerialP
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recent interview w/ Ted Benna - inventor of 401(k)

Post by AerialP » Mon Jan 07, 2019 10:48 am

I found this fairly recent article to be an interesting and quick read.
An interview with the "inventor" of the 401(k) about its beginnings and his thoughts regarding where it stands now as an investment vehicle.

https://www.barrons.com/articles/the-in ... 1542413142

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nedsaid
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by nedsaid » Mon Jan 07, 2019 1:11 pm

It was an interesting interview. I had known the basic story about 401(k)'s for a long time, pretty much a fluke. As I recall, it started as a way for high income managers to shelter some monies from tax. But the idea caught on and as they say, the rest is history. Another thing is that companies realized the 401(k) was a cheaper benefit to offer than a traditional pension plus the investment risk was transferred from employer to employee. Corporate America was over that like polka dots on a bikini.

I agree with Benna that pensions were going to die anyway. Guaranteeing retirement income is expensive, particularly in the context of volatile markets. A big drop in the markets could make a fully funded pension pretty dramatically underfunding pretty quickly. This happened to my former employer. What caused this problem was in the 1970's when pension managers realized that returns could be boosted by investing in stocks. Previous to that, pensions were pretty much liability matching, matching longer maturity bonds with future pension liabilities. So stock investments did reduce the employer contributions into these plans. Another thing was that over funded pension plans were targets of corporate raiders, why this was allowed I just don't know.

It would be very helpful to have an option to annuitize part of all of the balance upon retirement. In effect, pensionizing the 401(k), but that is another discussion.
A fool and his money are good for business.

BluesH
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by BluesH » Mon Jan 07, 2019 1:20 pm

nedsaid wrote:
Mon Jan 07, 2019 1:11 pm
It would be very helpful to have an option to annuitize part of all of the balance upon retirement. In effect, pensionizing the 401(k), but that is another discussion.
Yeah, but he said that he would require annuitization of all but 10%. That strikes me as a terrible idea.

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nedsaid
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by nedsaid » Mon Jan 07, 2019 1:24 pm

BluesH wrote:
Mon Jan 07, 2019 1:20 pm
nedsaid wrote:
Mon Jan 07, 2019 1:11 pm
It would be very helpful to have an option to annuitize part of all of the balance upon retirement. In effect, pensionizing the 401(k), but that is another discussion.
Yeah, but he said that he would require annuitization of all but 10%. That strikes me as a terrible idea.
The whole idea of retirement savings plans are to replace your salary during retirement. We are used to getting paid on a regular basis on our jobs and so getting paid regularly in retirement doesn't seem like such a bad idea. In the UK, they used to require turning balances in deferred retirement savings plans into annuities and it wasn't such a bad idea. This has now been changed.
A fool and his money are good for business.

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whodidntante
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by whodidntante » Mon Jan 07, 2019 1:49 pm

Interesting article. I disagree with his opinion that the 401k should be more restrictive with investment choices and withdrawal options available. I would really like to chose my own custodian and invest my money in any investment available to a retail investor, and to chose the plan features I want. Kind of like a solo 401k but with payroll contributions and company match. The current system limits my choice, increases cost, and presumes I'm not capable of acting rationally.

I also want to vote from my smartphone, while I'm making wishes. Lol.

bhsince87
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by bhsince87 » Mon Jan 07, 2019 1:57 pm

nedsaid wrote:
Mon Jan 07, 2019 1:11 pm


It would be very helpful to have an option to annuitize part of all of the balance upon retirement. In effect, pensionizing the 401(k), but that is another discussion.
That option exists now, doesn't it?
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

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nedsaid
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by nedsaid » Mon Jan 07, 2019 2:03 pm

bhsince87 wrote:
Mon Jan 07, 2019 1:57 pm
nedsaid wrote:
Mon Jan 07, 2019 1:11 pm


It would be very helpful to have an option to annuitize part of all of the balance upon retirement. In effect, pensionizing the 401(k), but that is another discussion.
That option exists now, doesn't it?
Well, yes. You can take all or a portion of your retirement kitty to an insurance company of your choice and buy an annuity. But if it is offered as a 401(k) option, the company has shopped around and by buying in bulk can get a better deal than you can on your own. Most 401(k) plans don't offer this.
A fool and his money are good for business.

bhsince87
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by bhsince87 » Mon Jan 07, 2019 3:01 pm

nedsaid wrote:
Mon Jan 07, 2019 2:03 pm
bhsince87 wrote:
Mon Jan 07, 2019 1:57 pm
nedsaid wrote:
Mon Jan 07, 2019 1:11 pm


It would be very helpful to have an option to annuitize part of all of the balance upon retirement. In effect, pensionizing the 401(k), but that is another discussion.
That option exists now, doesn't it?
Well, yes. You can take all or a portion of your retirement kitty to an insurance company of your choice and buy an annuity. But if it is offered as a 401(k) option, the company has shopped around and by buying in bulk can get a better deal than you can on your own. Most 401(k) plans don't offer this.
Ah, OK. Makes sense.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

Broken Man 1999
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Re: recent interview w/ Ted Benna - inventor of 401(k)

Post by Broken Man 1999 » Mon Jan 07, 2019 3:16 pm

If one has rolled their 401k to an IRA an annuity that stays in the IRA, a QLAC is available.

Might be a good choice for some.

Broken Man 199
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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