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John Nicholson is the founder of www.The 401K Man.com, an independent insurance & financial services agency dedicated to helping others find their solutions through the myriad of choices when seeking insurance, retirement and financial advice. John's career path began with helping others in the late 1980's and early 1990's. The 401K Man is an independent agency servicing the Midwest which provides a wide variety of choices as opposed to one size fits all plan available at many of the larger financial or "brand" insurance companies & firms. We offer many solutions from basic insurance policies to comprehensive estate planning.

Monday, February 3, 2014

The history of the 401K

Your 401(K) retirement plan grew from a variety of needs during the late 1970's. The original idea of this type of retirement program was proposed to supplement a pension and social security. 
The 401(K) plan after being almost eliminated 7 times by Congress in it's early days it has morphed into the current retirement plan for most Americans. Pensions were the norm for decades prior to the 1970s. Retirement savings plans similar to a 401(K) began with a need to avoid excessive tax for business executives in the late 1970's. The 401(K) first appeared in 1981 in a form that is pretty similar to today's plan.
In the economics of the mid 1970's major institutions and U.S. corporate giants and even whole industries were suffering through the worst economic times they had ever faced since the 1930s depression. The 1970s economic crisis had many reasons some were due to the oil crisis, pension debt and high interest rates.
The first waves of retirees whose pensions lacked the ability to keep up with inflation and businesses closing at a high rate were causing the government to find alternatives to a pension plan. High interest rates, taxes and a myriad of other things began causing many companies to fold and close. An alternative was needed to the pension that had been around from beginning of the 20th century. Businesses closed leaving many facing nothing after years of expecting a rightfully earned retirement.

The Pension Benefit Guaranty was formed to take over payments to individuals from bankrupted companies. Organizations threatened to move overseas and the government in an effort to ease the financial burden that pensions were seriously beginning to cost corporate America began a new plan with the passing  of the 1974 Employees Retirement Income Securities Act (E.R.I.S.A) This was the beginning of additional savings plans which contained legislation for a company to offer voluntary programs. These later became the 401(K) type plans which allowed employees to decide where to contribute pretax towards a retirement fund.
As of 2012 the numbers of companies offering true pensions are estimated to be less than 20% in the U.S.
Which brings me to my point for your own financial future do you know how important it is to start multiple programs for retirement, and why?
Your 401(K) is yours but please roll it over if you have left a place of employment. Letting it sit will do nothing. Make sure you transfer the asset from a qualified plan to another qualified plan to  avoid a tax. Even you do not anticipate using it, it will be far wiser to have the rainy day fund potentially accessible and at least gaining some interest versus getting nothing.
401(K) fixes was formed to help you remove your risk from retirement. Our trained licensed professionals can offer you some answers towards your retirement. Call us toll free at 877-775-0812 to reach a representative. Or use the contact tab below to submit your question and set an appointment if you like.