Why Does Ted Benna, the “Father of the 401(k),” Love the “501(k)” Plan?

The man widely credited as the “Father of the 401(k) Plan,” Ted Benna, is among those saying the plan is no longer a good way to save and invest for retirement. He cites concerns that the government may change the rules, and not in your favor; that an impending market crash will wipe out much of what you’ve saved for your retirement; and that staggering fees can eat up a large portion of your nest egg.

Benna has gone on record as endorsing something that has been creatively called a “501(k) Plan.” Ted Benna says,

I created a monster (the 401(k)) that should be blown up… I’m now putting most of my money in the 501(k).”

Don’t get distracted by the name “501(k).” Although “401(k)” refers to the section of the Internal Revenue Code that deals with retirement plans, “501(k)” is an obscure Internal Revenue Code reference that describes the educational status of certain child care organizations! Using “501(k)” to refer to some kind of retirement plan is a gimmick dreamed up by Madison Avenue types.

But all they did was take the Bank On Yourself concept, which is a proven 401(k) alternative, and give it a mysterious new name, the “501(k),” hoping you’ll pay money to find out what they’re talking about.

But while others are charging you money for this information, we’ve been giving it away for years! For FREE information about the Bank On Yourself method that others call a “501(k),” download our free report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future here.

History of the 401(k) Plan and Ted Benna’s Contribution to It

Section 401(k) was added to the Internal Revenue Code in 1978 to allow taxpayers to postpone paying taxes on deferred income. In 1980, benefits consultant Ted Benna realized this new section of the tax law could be used to create a simple, tax-advantaged way to save for retirement.

Benna used his interpretation of the law to create a so-called 401(k) plan for his own employer, The Johnson Cos., that allowed full-time employees to fund accounts with pre-tax dollars and matching employer contributions.

Benna then asked the Internal Revenue Service to change some proposed rules under the law that ultimately lead to the widespread adoption of 401(k) plans by employers in the early 1980s.

No one, least of all the federal government, could foresee that eventually 401(k) plans would become a $5-trillion industry, representing about one dollar out of every five in US retirement assets.

“I knew it was going to be big, but I was certainly not anticipating that it would be the primary way people would be accumulating money for retirement 30-plus years later,” Benna told Workforce Management in 2012.

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Then things started to go wrong with the 401(k)

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Benna says that originally 401(k) plans could be explained to employees in just a minute or two. “There were two options,” he says, “a guaranteed fund and an equity fund.” Most employees simply split their contributions 50/50 between the two options. Easy-peasy.

But then Wall Street stockbrokers and money managers began demanding—and mutual fund companies began creating—new funds with every conceivable investment objective in mind. As the number of options and their complexity increased, Wall Street found ways to pile on significant additional fees—fees which to a great extent remain below the radar for most investors.

Three decades after he seized on that obscure IRS section and used it to transform American retirement savings, Benna told SmartMoney he’s proud to be “father of the 401(k),” but he also thinks he created a “monster”.

Twice the government tried to repeal the provision of the tax law allowing 401(k) retirement plans. Benna reported this on his own website back in 2011. But did the government try to repeal the law because you were losing money to fees? Hardly! In Benna’s words, the government only tried to repeal the law “once it realized the enormous tax loss from the 401K provision.”

But the “monster” Benna created would not die. It was too popular with Wall Street and with employers who concluded that giving 401(k) matching funds to employees was far cheaper than giving them full-blown pension plans.

Why Ted Benna Is Now Endorsing the So-Called “501(k) Plan”

Ted Benna is joining the chorus of those who say American workers need a 401(k) plan alternative. He cites three reasons American workers should consider looking elsewhere for a place to grow their retirement nest egg:

1. The government may succeed in repealing the 401(k) tax code section that allows for these tax-deferred retirement funds.

Congress regularly considers making changes to 401(k)s, including taking away the tax deduction, according to Forbes. The government has tried to remove the tax advantages of 401(k)s before. The next time may be the charm.

2. An impending market crash will wipe out much of what you have saved for your retirement.

“Investors are in for a rude awakening about a coming stock market correction—most just don’t know it yet,” writes financial journalist Leslie Kramer for CNBC. “No one knows when the crash will come or what will cause it—and no one can. But what’s worse for most investors is they have no clue how much they stand to lose when it inevitably happens.”

3. Staggering—and hidden—fees are eating up a large portion of your nest egg.

“High retirement plan fees can take a huge bite out of your retirement savings. Often employees and employers may not even be aware that fees are being paid.”

Is Ted Benna’s 501(k) Plan the Best 401(k) Plan Alternative?

Benna is right that you need to investigate an alternative to your 401(k), IRA, and any other government-sponsored retirement plan you may have. For the three reasons he cites above, and because of these seven scary facts about your 401(k) that Bank On Yourself has been warning you about since 2009, you should investigate your alternatives sooner, rather than later.

For a free report on this topic that you can download and read immediately, grab your copy of 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future.

Ted Benna strongly recommends what he and the Palm Beach Research Group have dubbed the “501(k) Plan,” as a 401(k) alternative. In fact, Benna has publicly stated the he has put most of his money in this “501(k) Plan.”

It’s true! The “Father” of the 401(k) is telling us that 401(k) plans are not the safe investments Wall Street wants you to think they are. And Benna’s saying that high cash value dividend-paying whole life insurance policies, of the kind that are at the core of the Bank On Yourself strategy, offer the security and guarantees retirees need.

The “501(k) Plan” has gone by a number of different names

If you are thinking about a 501(k) plan, you might also be considering “President Reagan’s Secret 702(j) Retirement Account.” Then there’s the “770 Account.” And don’t forget the “Income for Life” plan discussed in the Big Black Book of Income Secrets.

Those are all offered as alternatives to a 401(k) or IRA. And all four of these exotic-sounding plans have been pushed by the same marketing company, the Palm Beach Research Group, since 2013.

And they’re just four different names for the exact same strategy. You guessed it! They are all copycat versions of the strategy most people know as Bank On Yourself, with a new label slapped on.

10 Reasons Why the 501(k) (Bank On Yourself) Is the Ideal 401(k) Plan Alternative

Your Bank On Yourself plan will be custom-tailored to your unique situation, goals, and dreams. When you request a free Analysis here, you’ll discover how your plan puts you squarely in control of your money and offers far more advantages and flexibility than a 401(k), including …

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Get instant access to the FREE 18-page Special Report that reveals how super-charged dividend paying whole life insurance lets you bypass Wall Street, fire your banker, and take control of your financial future.

1. Contributions are comparable to a Roth IRA for tax purposes

You contribute after-tax dollars that allow later access without owing income tax.

2. You get growth that is guaranteed and predictable

You can actually count on the retirement income a Bank On Yourself plan guarantees. And it doesn’t take any luck, skill, or guesswork.

3. There is no volatility

No volatility at all! No ups and downs and sleepless nights. You don’t lose money—not even on paper—when the market tumbles. Your principal is guaranteed. And every penny of growth in your Bank On Yourself plan is yours to keep. Forever.

4. You are the one in control

Not the government. Not your employer. There are no government penalties or restrictions. Want to borrow from your plan? Be our guest—no penalties! Want to take money out “early”? There is no “early”—take it when you need it! Want to leave your money in your plan when other retirees are forced to take withdrawals from their government-approved plans and pay taxes? No problem!

Get Your FREE Report!

Get instant access to the FREE 18-page Special Report that reveals how super-charged dividend paying whole life insurance lets you bypass Wall Street, fire your banker, and take control of your financial future.

5. And speaking of taxes, Bank On Yourself plans offer tremendous tax advantages

We tell you right here how to access your principal and growth with no taxes due, under current tax law.

6. Then there’s liquidity

You can tap into your cash value for any purpose at all, and the only questions you’ll be asked are (1) How much do you need? and (2) Where should we send the money? Plus, your plan can continue growing as if you’d never touched it.

7. Forget fees!

Fees in traditional retirement plans can devour as much as half your savings over time. And very often those fees are well-hidden. All you know is that your money doesn’t seem to be growing as fast as you expected. But with a Bank On Yourself plan, you’ll see in advance the competitive growth of your account, spelled out year-by-year, after all costs have been deducted.

8. You can leave a legacy income tax-free

The death benefit your family or favorite charity receives could well be far more than what you’ve paid in over your lifetime. And your beneficiaries will get this money income tax-free—and without going through probate.

9. Perhaps the biggest advantage of all …

The peace of mind Bank On Yourself can provide. Think of it! No volatility. Guaranteed growth. And you’ll know the minimum guaranteed value of your plan on the day you plan to tap into it—and at every point along the way!

10. A Bank On Yourself plan avoids all the 401(k) traps and pitfalls

401(k) plans are full of “gotchas!” as I explain in my blog post, Six Reasons Your 401(k) is a Scam. Bank On Yourself plans avoid all of them.

Those are just some of the advantages Bank On Yourself offers you. You can’t find another plan anywhere that has this marvelous combination of benefits. To learn more, download our free report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future here.

Get a FREE No-Obligation 501(k) / Bank On Yourself Plan Analysis from a Professional

You can easily find out what your bottom-line numbers and results could be before you decide whether to add the Bank On Yourself method to your financial plan. Just request your free Analysis here. When you do, you’ll receive a referral to a Professional (a life insurance agent with advanced training on this concept) who will prepare your Analysis and Solution.

Take the first step to a lifetime of financial security right now, while you’re thinking of it.


  1. Looks very interesting ~ However how can a whole life policy solution benefit the (futures) financial well being for someone who is in retirement with a good deal of his/her investments are in what is being considered a risky & dismal direction.. Wouldn’t the premiums on the policy be restrictive (???) say for people in their mid to late seventies.. Any thoughts!

    • Neither age and/or poor health are necessarily obstacles.  What matters is only that you CONTROL the policy and the equity in the policy, NOT that you are the insured.

      You could have anyone that you have an “insurable interest” in be the insured.  Typically this could be a member of your immediate family, such as your spouse, a parent, a child or a grandchild, or a business partner.

      This is also something many older folks like to do for their children and/or grandchildren to help them build financial security, fund college educations, buy a house, etc.

      People of all ages can – and do – use this proven wealth-building method.  And there are special Bank On Yourself programs available for folks who are age 60 and up.

      To learn more about those programs, check out these two videos and transcript.

      If you are interested in this strategy and would like to find out if you qualify for it and how you could benefit from it, given your unique goals, circumstances and dreams, why not take advantage of a no-obligation Bank On Yourself Analysis that will help you get those answers?  You can request it online here.

  2. I am deeply concerned about todays markets. I’ve been invested in 401k in just about every employer that I worked for. 2008 housing market crash I lost an excess of $10k through my 401k and misc amounts throughout the years to follow, and again with this covid pandemic I lost over $18k through a different 401k plan. Would like to know options to flip 401 into 501 plan if this is possible. Thank you in advance.

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