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401 (k)
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A 401 (k) is a type of retirement savings account in the United States which takes its name from subsection 401 (k) of the Internal Revenue Code. A contributor can begin to withdraw funds after reaching the age of 59 and 1/2 years. 401 (k)s were first widely adopted as retirement plans for American workers, beginning in the 1980s. The 401 (k) emerged as an alternative to the traditional retirement pension, which was paid by employers. Employer contributions with the 401 (k) can vary, but in general the 401 (k) had the effect of shifting the burden for retirement savings to workers themselves. In 2011, about 60% of American households nearing retirement age have 401 (k)-type accounts.
The first cohort of workers to widely adopt this style of retirement plan are beginning to retire, and the plans now appear to generally be falling short. This shortfall, however, does not appear to be attributable to the mechanics of the system itself but rather the employees not taking advantage of the benefits provided by it.
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