Practically every fulltime employee working at a company has a 401k plan setup for them. Indeed, there are well over 65 million 401k accounts in the country with more continually being created, especially with all the concern regarding the future of social security. What 401k savings do is provide taxpayers with a source of income for when they are retired, so that people will not have to rely solely on other programs like social security, which may not be sufficient to ensure a decent standard of living.

The year was 1978 when the 401k plan was started. This was a matter passed by congress that was designed to give taxpayers a way to minimize their taxes on deferred income. Initially, these plans were not overly popular, but soon after one man started a major change in the way that people could save for their golden years. Ted Benna was a benefits consultant who was trying to find ways to maximize a client’s investments when he realized that the new 401k provision would work to allow people to save money for their retirement.

The 401k plans exploded after that, with most companies adopting the system and helping their employees save. The best part of the 401k investment plan was that employers usually offered to match a percentage of whatever the employee chose to contribute to their account. This meant free money in a large sense, and that was not lost on many people. Other employees jumped at the chance to get more involved with investing once it was more accessible and less expensive for them to do so.

There are now more options than ever before regarding a 401k retirement plan and savvy investors are able to do more with their accounts than previously possible. However, with the extra options and chances to make more money, there are more risks as well. With employers often matching employee contributions, a successful company might see employees investing a high amount of their earnings in the place where they work. When the company does well, this produces positive results for everyone. Yet if the company runs into financial trouble, most famously with Enron, then not only could employees be out of a job, but their retirement savings could be cut down to nothing, depending on how much money was tied to their company.

Properly managing a 401k is the key to being successful. Most plans will show a healthy return if the investors choose the right plan and diversify their investments so that one case of bad luck does not erase years of savings. As with all things money related, it is important to stay knowledgeable about financial matters and to seek advice from professionals before making any major decisions.

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