A 401(k) Is Actually a Tax Loophole

The U.S. is one of the only first world countries that essentially ended pension programs–retirement programs funded by employers.  Pensions used to be a popular benefit in the U.S. to keep workers loyal to a company while at the same time making retirement decent and reasonable.  pensions were eventually replaced with 401(k)s.

What you may not know is that 401(k)s are not retirement plans designed by law.  They are actually derive from a loophole in the 1978 tax code which was never meant to be used as a retirement system for essentially the whole country.  As a result, must Americans have to save until the age of 70 and hope against a market crash in order to have a retirement.

Few people realize that what is now the most popular retirement savings vehicle in the U.S. was not seriously debated or discussed by the U.S. Congress.  Rather, it was created by a loophole of the law which a smart benefits consultant figured how to exploit in the 1980s.

Nobody has done anything to fix it since.  Meanwhile, pensions continue to decline and Social Security funding continues to dwindle.


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