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The Man Who Built It Wants to Tear Down Part of It
Ted Benna spent four decades watching his invention become the backbone of American retirement savings. Now 84, he is the reason tens of millions of workers have a line on their pay stub marked "401(k) contribution." A 401k plan was never meant to be perfect for everyone, but even its own architect now admits it isn't working for the people who need it most.
"The 401(k) isn't working really well now for many middle- and lower-income employees," Benna told Bloomberg. His complaint isn't abstract. Truckers, retail staff, hourly workers — the people whose paychecks don't stretch past rent and groceries — often can't afford to have money pulled out before they ever see it, even when their employer offers the chance.
How a 1980s Tax Loophole Became the Default Retirement Plan
The 401(k) wasn't originally designed to replace the pension. It emerged roughly 40 years ago as a narrow provision in the tax code, and Benna was among the first to realize employers could use it to let workers set aside pretax income for retirement. Over the following decades, as traditional pensions became expensive liabilities that companies wanted off their books, the 401(k) quietly became the substitute — not because it was engineered to replace a pension, but because it was cheaper for employers and required no long-term guarantee.
That shift explains a lot about why the plan now struggles for the workers Benna is most worried about. A pension didn't ask an employee to choose between rent and retirement savings this month. A 401(k) does, every single pay period, and the choice isn't equally hard for everyone making it.
The Numbers Behind Benna's Regret
There is a real success story inside the 401(k) system — there's now a record number of 401(k) millionaires, and for high-income earners the plan has proven to be an efficient wealth-building tool. But that success sits on top of a structural feature that tilts the entire system toward people who were already doing fine.
Employer matching, the single biggest incentive built into most 401(k) plans, is "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. The mechanism is simple enough: the more you earn, the more you can afford to defer, and the more your employer matches. A worker living paycheck to paycheck can't defer enough to capture the same match, so the same benefit that builds real wealth for a six-figure earner barely registers for someone earning $35,000 a year.
Why So Many Workers Simply Opt Out
Access isn't the real bottleneck — participation is. About 70% of private-sector workers have access to a defined contribution plan such as a 401(k), according to 2025 data from the U.S. Bureau of Labor Statistics, yet only half actually choose to participate. The gap between those two numbers is the clearest evidence that the plan's design, not its availability, is what keeps lower-income workers out.
Hardship withdrawals tell the rest of the story. They hit a high of 6% in 2025, meaning a growing share of workers who did manage to save are now pulling that money back out early, often at a tax penalty, because an emergency left them no better option. A 2019 report from the Economic Policy Institute went as far as calling the shift from pensions to 401(k)-style plans "an experiment that failed, widening the gap between retirement haves and have-nots" — and that verdict came before a pandemic, supply chain shocks, trade wars and years of rising grocery and housing costs made saving even harder for the workers Benna is describing.
Benna's Answer Is a Peppery Vegetable Called Radish
Benna's latest project, co-founded with entrepreneur Kyle Bagley, is an employer-funded incentive program called Radish, named for a vegetable that takes root and grows fast. Instead of pulling money from a paycheck, employers deposit funds into a worker's account when that worker hits performance goals — on-time delivery, safety targets — or as an annual retention bonus. Because the money never passes through payroll, there's no payroll tax for the employer, and the employee never has to choose between today's rent and tomorrow's savings.
The money grows tax-free until withdrawal, and workers can eventually roll it into a company 401(k) or an IRA. No companies have signed on yet, but a pilot project is coming. It shares a goal with another idea in the Economic Policy Institute report, a Guaranteed Retirement Account funded by minimum employer and employee contributions of 1.5% of pay, offset for low earners by a $600 tax credit — a reminder that fixing this gap doesn't require abandoning tax-advantaged savings, just rethinking who it's built to serve.
Frequently Asked Questions
Why don't more workers use their 401k plan even when their employer offers one?
Many lower-income workers can't afford to have money taken out of each paycheck, even when they have access to a plan. Only about half of workers with access to a 401k actually participate, according to 2025 Bureau of Labor Statistics data, because the immediate cost of deferring income outweighs the long-term benefit for someone living paycheck to paycheck.
Does 401k employer matching benefit everyone equally?
No. Research cited by the Harvard Law School Forum on Corporate Governance found that roughly 44% of employer matching subsidies go to workers in the top 20% of earners at their companies, because higher earners can afford to defer more of their income and capture more of the match.
What is a hardship withdrawal and why does it matter?
A hardship withdrawal lets a worker pull money out of a 401k early, typically with a tax penalty, to cover an urgent financial need. These withdrawals hit a high of 6% in 2025, signaling that a growing number of workers are being forced to tap retirement savings just to cover current expenses.
What is Radish, and how is it different from a 401k plan?
Radish is an employer-funded incentive program created by Ted Benna and Kyle Bagley. Instead of deducting money from a worker's paycheck, employers deposit funds when workers hit performance goals or as retention bonuses, so the savings never require the employee to give up current income.
Can small, consistent savings actually build meaningful wealth over time?
Yes. Investing just $20 a week for 30 years could grow to more than $179,000 assuming a 10% annual compounding rate, which shows how consistent small contributions can outperform waiting until you can afford to save a larger amount.
Sources
Disclaimer: This article is based on information available at the time of publication and is provided for general informational purposes only. It is not legal, financial, medical, or professional advice. Figures, dates, and policy details can change after publication — verify anything you plan to act on with the official sources listed above. RamthaMedia accepts no liability for decisions made on the basis of this content.
