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The Original Intent of 401(k) Plans

Morphing is an incredible process. We see original creations evolve over time under the pressure of things around them, and such is the case with the tax-qualified, defined-contribution 401(k) plans introduced in the late 1970s as a means for workers to defer taxation on a portion of their wages, and to let the earnings on these deferrals grow untaxed until a later date. As pointed out in an article by Michigan Radio’s Stateside Staff, these plans “were never intended to be a substitute for a pension.” Yet, with the constant disappearance of traditional defined-benefit pension plans, that appears to be exactly what is happening. Check out this post for more background on this issue…


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