November 17, 2006 | Posted By Diane Pfadenhauer | print this article

Happy Birthday 401(k)

Today marks the 25th birthday of the 401(k) plan.  The plans were designed in an effort to allow employees to supplement their existing retirement plans, according to a recent article in the Wall Street Journal.  We all know, however, that the trend has been that, for many, their traditional pension plans have been replaced by 401(k) plans. 
  • 25 Years ago, there were 30 million active participants in traditional defined benefits (DB) plans and 19 million in other non-401(k) defined contribution plans.
  • Today there are about 47 million participants in 401(k) plans, 21 million participants in DB plans and 8 million in other defined contribution plans.
Sadly, 25% of eligible employees do not participate in their employer's 401(k) plans, even when the employer provides a match.  Fewer than 10% of investors save the maximum allowed ($15,500 in 2007 and $20,500 for those over 50).