351: Ted Benna: The $10 Trillion Inventor


Ted Benna was working for an insurance firm outside Philadelphia about 40 years ago when he figured out how to use an obscure provision of a 1978 tax law—section “401(k)”—and turn it into an employee retirement account for contributions from both employees and employers. He designed it as a fringe benefit for banks that wanted to save taxes when they transferred bonuses to employees. In the years since, however, it’s grown into much more—it’s now the dominant way that Americans save for retirement, helping them collectively amass trillions.

Today, he’s proud that his invention has helped millions of people prepare for retirement. But the plain-spoken Pennsylvanian now says that the accounts have an “ugly” side—primarily that they have made mutual fund companies and investment managers rich off fees that grew way too high. He’s now on a crusade to design simpler plans with lower fees that put money in the pockets of future retirees, not money managers.

Ted Benna is commonly referred to as the “father of 401(k)” because he created and gained IRS approval of the first 401(k) savings plan. He has received many citations for his accomplishments including:

  • 2001 National Jefferson Award recipient for Greatest Public Service by a Private Citizen,
  • 2001 Player of the Year selected by Defined Contribution News,
  • one of eight individuals selected by Money Magazine for its special 20th Anniversary Issue Hall of Fame,
  • selected by Business Insurance as one the four People of the Century,
  • one of ten selected by Mutual Fund Market News for its special 10th Anniversary Issue Legends in Our Own Time and
  • Lifetime Achievement Award by Defined Contribution News 2005.

Ted Benna will share why the 401K was never intended to fund a full retirement for people but was only one component to it and that the current form and structure of the 401K needs a makeover.

Ted is a business owner and real estate investor, two vehicles in which he creates and receives income from.

As you know, I am not a proponent of the 401k, in fact, I am a very big critic of the 401K.  I don’t regard it as a savings vehicle, it is actually an investment vehicle if you look at the definition of savings and investing, you do not have control over your money, it is very high in fees as Ted has pointed out, and it differs taxes 30-40 years into the future. Defers means postpone.

As you know as listeners of the cashflow ninja, this is not an echo chamber just of ideas and investments I support, but a platform to share many different ideas and investments to help educate my audience.

I really enjoyed my conversation with Ted Benna and he brings a great perspective to this vehicle and also shares a wealth of knowledge and his experience.

Interview Links:

Tedd Benna Website

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