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

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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.

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.

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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. 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.

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.

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

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.”

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.

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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.

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, so long as they’re consistent.

One option is to open a high-yield savings account (HYSA) or IRA — one that doesn’t require a minimum opening deposit — even if you only deposit a small amount each month.

The idea is to get in the habit of saving. Setting up automatic transfers can make this easier (out of sight, out of mind). 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.

You could even start investing in fractional shares of stocks and ETFs (meaning you don’t have to buy a full share). Most major brokerages allow you to buy fractional shares for as little as $1 to $5, removing the cost barrier for low-income earners.

While this might not exactly fund your retirement, like Benna’s Radish, it’s meant to be a retirement savings ‘gateway’ that will kickstart the process of saving for retirement — especially for those who’ve felt it’s out of reach.

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

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