As the 401(k) Turns 25, it Gets Streamlined

The 401(k) turned 25 this month, and with that milestone, experts hope that it will continue to become more streamlined in the years ahead so that investors are prepared for retirement, The Wall Street Journal reports.

The trouble is, when the 401(k) was first introduced, it was supposed to supplement, not replace, pensions. By placing all investment responsibility on the individual, it does a poor job of preparing investors for retirement, said Alicia H. Munnell, director of the Center for Retirement at Boston College.

But now that the Pension Protection Act has been passed, Munnell and other experts hope that the tools it gives employers will boost savings, namely automatic enrollment and increases.

“The 401(k) is hitting its stride,” maintains Sarah Holden, a senior economist at the Investment Company Institute. “They started out facing stiff headwinds, and it’s only recently that we made them simpler.”