Most people are unaware that the 401k is only 35 years old. It was created in 1978 and the first plan was not put in place until 1980.
There may be a new 401(k) myth on the horizon, if President Obama gets his way with the tax-qualified retirement accounts of Americans. When the President revealed his 2016 fiscal year budget, it included a proposal to place a limit on the amount of money workers can contribute to their tax-favored retirement accounts; this includes their IRAs, 401(k) accounts and private pensions.
Perhaps it’s because of public misinformation. There is a widely held belief that any policy placing restrictions on investments is designed to hurt only the wealthiest Americans – the so-called “one percent.” In fact, one of the many misconceptions of the 401(k) floating around is that it is only available to high earners. If you are a middle class earner with a 401(k), you know that isn’t true. If a policy that limits how much workers can contribute to their 401(k) accounts comes to fruition, it would actually hurt the middle class more than anyone else.
Just like Social Security before them, IRA and 401(k) accounts are subject to rule changes that the government assured us wouldn't happen. Decades ago, Americans believed their Social Security accounts had minimal tax implications – but in 2015, as much as 85 percent of Social Security income can be taxed. In 1978, Americans were told 401(k) accounts were a tax-favored alternative to living on Social Security – and now, that is on its way to becoming one of the growing misconceptions of the 401(k).