The importance of having a 401k has become more so in recent years, as concerns regarding the future of pension plans and social security have risen. Specifically, 401k accounts have been set up by the government to allow taxpayers to save money as a supplement to social security and other government sources of income for when people have finished working. There are different tax benefits and opportunities to make more money that are also part of this kind of investment.

The year was 1978 when the 401k plan was started. This was a matter passed by congress that was designed to give taxpayers a way to minimize their taxes on deferred income. Initially, these plans were not overly popular, but soon after one man started a major change in the way that people could save for their golden years. Ted Benna was a benefits consultant who was trying to find ways to maximize a client's investments when he realized that the new 401k provision would work to allow people to save money for their retirement.

What happened afterwards was a 401k boom. The benefits were largely centered on the investor's ability to invest in stocks and bonds at a much lower cost than before. Previously, taxpayers had to rely on pension plans, which were not as financially beneficial, and often saved their money in simple savings accounts that couldn't really keep up with inflation, or they literally hid their money under their mattresses. The other added bonus was that employers would often match the 401k contributions that their employees were making to the plan, which of course meant more money could be saved.

There are now more options than ever before regarding a 401k retirement plan and savvy investors are able to do more with their accounts than previously possible. However, with the extra options and chances to make more money, there are more risks as well. With employers often matching employee contributions, a successful company might see employees investing a high amount of their earnings in the place where they work. When the company does well, this produces positive results for everyone. Yet if the company runs into financial trouble, most famously with Enron, then not only could employees be out of a job, but their retirement savings could be cut down to nothing, depending on how much money was tied to their company.

The 401k plans are still the main source of retirement income for most Americans, and they allow for a healthy nest egg if managed properly. 401k management that is poor, however, can have a disastrous effect on a family's retirement dreams. The past couple of decades have shown that average taxpayers can invest their finances in ways to produce more money. The important thing is for the investor to seek proper advice and diversify their accounts to make their retirement dreams a reality.

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