Modern 401k Plans Explained

401(k) | Retirement Planning | InspireHer: Plancorp Women’s Initiative

 Susan Conrad By: Susan Conrad

I recently contributed to a story examining how today’s 401k plans may be unrecognizable to the first ones created in the early 1980s. Five dramatic differences between modern 401k plans and their distant Reagan-era cousins:

  • More Universal Participation
  • More Investment Choices
  • Better Investment Choices
  • Greater Automation
  • Greater Transparency

I explained, “401k plans have changed drastically since the 1980s. A ‘401k plan’ is actually a profit sharing plan with a 401k provision. 401k was meant to be a source for employees to contribute if they choose.”

The original 401k plan attracted retirement savers while proving equally attractive to those creating investment products for retirement savers. Bringing these two parties together was the growing computer power utilized by plan record-keepers resulted in an array of investment options.

Over the years, the 401k plan structure has evolved offering more flexibility from a plan design perspective to help meet the needs of not only the adopting company, but also its participants, as today’s 401k plans have become an attractive retention tool for employers. Greater transparency has forced plan costs down, with more costs picked up by plan sponsors, giving the employee a far better deal, while, technological advances have allowed access to a far greater spectrum of investment choices, empowering employees to achieve a greater degree of success with his/her financial goals.

To read the article in its entirety, click here.

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This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

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Susan has more than 25 years’ experience in the pension and retirement space, including 20 years at First Mercantile Trust (now a member of the MassMutual Financial Group). Her tenure at the firm armed her with a thorough understanding of the dollars and cents side of corporate retirement planning and importance of plan design. More »