In my (soon-to-be published) ebook, The Improbable Millionaire, I talk about how taking advantage of the 401K plan offered to me when I was hired on at Harris Corporation in 1983 — partnered with learning how to invest some years later — helped turn me into an Improbable Millionaire just fifteen years after a surprise divorce left me in dire straits in 1982.
The 401K plan was a very new benefit in 1983, and although I didn’t understand all of its details, I did see its potential and took advantage of that, contributing the maximum percentage of my salary I could from day one even though my budget in those days was tight.
The 401K plan, named after a section in the Internal Revenue Code, has grown into the major supplemental retirement program to social security. But it started out as an accident. The Revenue Act of 1978 was passed by the US Congress, and amongst other things, there were rules to cap the amount of money corporate executives could defer from their salaries to avoid current year taxes, a practice that had been growing since the 1950s.