Ted Benna built the 401(k) 40 years ago — now he says it fails lower-income workers and is pushing a simpler alternative

Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.

For high-income earners, the 401(k) has proved to be a successful wealth-builder — there’s even a record number of 401(k) millionaires (1).

But the man known as the father of the 401(k) is having some regrets. Ted Benna, now 84, helped create the ubiquitous workplace retirement plan about 40 years ago.

Must Read

Now he says 401(k) plans have become too costly and complex. And they don’t benefit the lower-income workers — truckers, retail staff, hourly workers — who need them most.

“The 401(k) isn’t working really well now for many middle- and lower-income employees,” Benna told Bloomberg (2). Many of these employees “can’t afford to have money taken out of their paycheck even if they have the opportunity to do so.”

Here’s how he thinks people should be saving instead.

Why 401(k)s aren’t working for everyone

Research has shown that 401(k)s disproportionately benefit high-income workers. After all, the larger your paycheck, the larger your savings — especially when those savings are matched by your employer.

Employer matching programs are “biased toward the affluent, with estimates suggesting that 44% of employer subsidies go to workers whose wages are in the top 20% of their workforces,” according to a report published by the Harvard Law School Forum on Corporate Governance (3).

While 70% of private-sector workers have access to a defined contribution (DC) plan such as a 401(k), only half have chosen to participate, according to 2025 data from the U.S. Bureau of Labor Statistics (4).

And hardship withdrawals from 401(k)s hit a high of 6% in 2025 (5).

Indeed, a 2019 report from the Economic Policy Institute suggests that the retirement system “is broken,” and that the shift from traditional pensions to 401(k)-style DC plans “was an experiment that failed, widening the gap between retirement haves and have-nots.” (6)

And this was before a global pandemic, supply chain disruptions, geopolitical conflict, tariffs and trade wars, energy shocks and rising inflation that has elevated costs for everything from housing to groceries.

So, for many Americans struggling to pay their grocery bill, putting money aside in a 401(k) isn’t exactly a top priority.

Read More: Millionaires under 43 hold only 25% of their wealth in stocks. Here’s where their money is actually going

Alternative approaches to workplace retirement plans

Benna’s latest project — co-founded with entrepreneur Kyle Bagley — is an employer-funded, tax-advantaged incentive program called Radish (named after the peppery vegetable that quickly takes root and grows fast).

Here’s how it works: When lower-income workers hit certain performance goals, such as on-time delivery or safety targets, employers deposit money into their account. Or, employees could get an annual retention bonus.

Contributions don’t pass through payroll, so — like a 401(k) — there’s no payroll tax for employers. But Benna also sees this as a way to improve employee retention and performance — and, in turn, boost revenue.

Employees, on the other hand, get access to a tax-advantaged savings account without any money coming off their paycheck. And that money grows tax-free until they withdraw it. They could eventually roll that into the company’s 401(k) or an individual retirement account (IRA).

So far, no companies have signed on, but a pilot project will soon be underway.

Another alternative, according to the Economic Policy Institute report, is a Guaranteed Retirement Account (GRA) plan — a portable retirement account in which both employees and employers contribute at least 1.5% of pay.

To make the plan affordable for low-income workers, employee contributions would be offset by a $600 tax credit, according to the Institute. This, it argues, should be done in conjunction with an expansion of Social Security retirement benefits (6).

But, for Radish (or similar alternatives) to take root, it will require a major shift in thinking. After all, for many employers, the 401(k) is a success story — especially since they’ve been able to ditch costly traditional pension plans.

How to start saving — even if you’re struggling

Maybe you don’t have access to a 401(k). Maybe you do, but you can’t afford to max it out.

If you’re struggling to pay the bills each month, waiting for your employer to offer an alternative to the 401(k) — such as Radish or a GRA plan — may seem like waiting for paint to dry or grass to grow.

But even small actions can add up over time.

Build good financial habits

Retirement can feel like a distant goal when you’re living paycheck to paycheck. But building wealth doesn’t always start with big investments — it starts with building consistent habits.

One of the easiest ways to do that is by setting up automatic transfers. But if you don’t have much cash left over after monthly expenses, start with micro-savings — even just $5 to $20 a week.

“Micro-savings — those small, regular deposits — can quietly build momentum, reduce stress and bring your goals within reach,” according to Fidelity Viewpoints (7).

Those seemingly insignificant contributions can become surprisingly powerful over time, thanks to the powers of compounding. For example, investing just $20 per week for 30 years could grow to more than $179,000, assuming it compounds at 10% annually (8).

Platforms like Acorns let you turn your spare change from everyday purchases into an investment opportunity.

Here’s how it works: All you have to do is link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio managed by experts at leading investment firms like Vanguard and BlackRock.

With Acorns, you can invest in an index ETF with as little as $5 — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey.

Add a safe haven asset

Once you’ve established the habit of investing, the next step is making sure your retirement portfolio can weather market ups and downs. While stocks have historically delivered strong long-term returns, they aren’t the only option inside retirement accounts like IRAs.

You can also hold alternative assets that may help reduce overall portfolio risk.

Gold is a popular choice because it has historically acted as a store of value during inflation, recessions, and geopolitical uncertainty. Unlike paper currencies, it can’t simply be printed into existence, giving it lasting appeal during periods of economic stress.

That’s one reason investors frequently turn to gold when markets become volatile, pushing prices higher. Gold prices have more than doubled over the past five years, hitting multiple record highs along the way and outpacing the S&P 500 over the same period.

Opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals in physical forms while also providing the significant tax advantages of an IRA.

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.

If you’re curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today.

Use a high-yield account

Investing for retirement is a marathon, but emergencies rarely wait for the perfect moment.

That’s why many financial experts recommend building an emergency fund alongside your investment portfolio. A solid cash cushion can help cover unexpected expenses without forcing you to sell investments during a market downturn or rack up expensive credit card debt.

A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.

A Wealthfront Cash Account currently offers a base APY of 3.30% through program banks, and new clients can get an extra 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.

That’s ten times the national deposit savings rate, according to the FDIC’s March report.

Additionally, Wealthfront is offering new clients who enable direct deposit ($1,000/mo minimum) to their Cash Account and open and fund a new investment account an additional 0.25% APY increase with no expiration date or balance limit, meaning your APY could be as high as 4.30%.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.

Consult an expert

As your retirement savings begin to grow, making the right financial decisions becomes increasingly important. Americans believe they’ll need about $1.46 million to retire comfortably, according to Northwestern Mutual (9).

But the reality is that there’s no universal retirement number. Your personal target could be significantly higher or lower depending on your income, spending habits, retirement timeline, and financial obligations.

Rather than relying on general rules of thumb, a financial advisor can help build a customized financial plan. They can evaluate your investment mix, estimate future expenses and help ensure you’re saving enough. Research from Envestnet found that investors who receive professional financial advice tend to earn roughly 3% higher net returns than those who don’t (10).

Finding a reliable financial advisor near you is now easier than ever with Advisor.com.

Just enter a few details about your finances and goals, and Advisor.com’s AI-powered matching tool will connect you with a qualified expert best-suited for your needs based on your unique financial goals and preferences.

Advisor.com does the heavy lifting for you, vetting advisors based on track record, client ratios and regulatory background. Plus, their network comprises fiduciaries, who are legally required to act in your best interests.

The best part? Advisor.com lets you set up a free initial consultation, with no obligation to hire, to see if they’re the right fit for you.

— With files from Vawn Himmelsbach

You May Also Like

Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.

Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Fidelity (1); Bloomberg (2); Harvard Law School Forum on Corporate Governance (3); U.S. Bureau of Labor Statistics (4); Vanguard (5); Economic Policy Institute (6); Fidelity Viewpoints (7); Acorns (8); Northwestern Mutual (9); Envestnet (10)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.