One of our clients recently asked us for some “fun facts” about the 401(k) that he could share in his company’s employee newsletter. We thought that was such a fun exercise that we are sharing some of these facts here!
The following is not intended to represent any financial or tax advice, it is merely for fun:
- The 401(k) is named after the section of the tax code that first(and some would say accidently) created them, the Revenue Act of 1978. At least it’s not the full name of the legal code, which is something like: Title 26 › Subtitle A › Chapter 1 › Subchapter D › Part I › Subpart A › § 401.
- 401(k)’s were “accidentally” discovered by a benefits consultant in 1980; before that, no one really knew the tax code could be used in the way it is today!
- In 1981 the IRS issued guidance that allowed the funding of 401(k) plans through employee salary reductions, and helped make them what they are today.
- The 401(k) is the most popular defined contribution retirement plan in the US, followed by the 403(b) (which is used by some non-profits).
- 401(k) withdrawals become mandatory when you reach 70 and 1/2 years old, so if you are there, maybe it’s time to take the grandkids to Disney World! (Just an idea, you should probably consult with a financial advisor before spending a lot of your retirement account on a vacation.)
Did we miss any good ones?