The state of the 401(k)

In any debate, however, one word you’re unlikely to hear anyone use to describe America’s most-used retirement account is “innovative”. For more than 40 years, HR departments have included it in benefits packages with little excitement or fanfare. And while other benefits have innovated with the times - look at what Covid did for wellness and mental health offerings - the 401(k) remains the same.

The Two Sides

Some will praise the “free money” from employer matches. This aspect can aid companies engaged in the cut-throat battle for top talent. When it comes to recruitment, this study found that a dollar in a 401(k) matching program has twice the impact of a dollar of cash compensation.

Others will claim it’s a benefit largely used by those who are already high earners and that most people, especially those who are working or middle class, simply don’t take advantage of it. And they’d be right. (This NYT piece, Was the 401(k) a Mistake?, does a great job of fleshing that out.)

No matter which side you fall on, the 401(k) remains king of the hill. Despite there being trillions in 401(k)s, the median value of those accounts is $30,000, which, as we’ve learned, doesn’t get that employee close to Charlie Munger’s $100,000 theory.

We Need to Innovate

In short, retirement accounts are an area hungry for innovation, and we believe there are creative, strategic and insightful HR and finance leaders with bold ideas on what to do.

Yes, we at Basic Capital have our own thoughts about reimagining the country’s most popular retirement vehicle, but we know we can’t do it alone. So we want maverick HR and finance leaders to tell us how they view the 401(k) in today’s economy, and how valuable it is as a tool for recruitment, how their workforce perceives it. Then we want to share your insights with the broader community.

We will release an annual State of the 401(k) Report, so if you fit the bill and have 5 minutes, we’d love to hear your thoughts: