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To my parents' generation, financial security meant working for the same company your whole life. Then when you turned 65, they gave you a gold watch, and once a month you trundled out to the mailbox to get your lousy pension check. The size of the check never changed, and you hoped like hell that the company you devoted your life to didn't go broke. And if you were the breadwinner of the family and you died, good luck to your heirs.

In 1978, all that began to change. That was the year that the 401k program came into being and it was both revolutionary and evolutionary. It took the responsibility for providing for one’s retirement finances out of the hands of the employer and put it in the hands of the employee. For some, this was fantastic news, and for others it was a non-event.

A recent study by the University of Texas documents how dramatically different the program impacts individual account owners. The Texas study took data from 401k participants between the ages of 50 and 60 and found some revealing results; The average account balance for this group was $843,742, but the median figure was only $158,272.

Next the researchers analyzed the investment choices of the 50 to 60 age group. The discovered that 78% of the accounts with larger than average balances were concentrated in stock mutual funds, predominantly index mutual funds. Those accounts with balances below the median had a higher portion of their assets in target date funds. Target date funds hold a mix of stocks and bonds and as the owner ages, the stock portion declines and the bond portion increases.

There are two factors that contribute to the growth of a 401k account. The first is the employees payroll contribution. Next are the investment decisions made by the account owner. And here the employer has not been totally removed from the picture. They have the responsibility for determining the mutual funds listed in the plan’s investment menu. While it is impossible to determine the exact impact the investment choices have on asset growth, both parties, employers and employees, must do their homework in order to optimize the outcome.

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During a 1963 debate on the federal budget, the Senior Senator from Illinois, Everett Dirksen proclaimed, “a billion here, a billion there, and pretty soon it starts to add up to real money.” Dirksen didn't use exact numbers, and that was not his intent. He used hyperbole to point out that the proposed level of federal spending would have significant impact on the lives of the American public.

The same thing can be said about the current state of our nation’s 401k program: “It is starting to add up to real money.” As it was in Dirkson’s case, the numbers I am about to present are not precise, but because of the massive dollar amount involved, lack of specificity does not diminish the significant role our 401k plan plays in the lives those living out their golden years.

The 401k program became the law of the land in 1978. It allows workers to place a portion of their paycheck into a tax sheltered account that will become their primary income source once they retire.

The growth of an individual 401k account has two distinct components. First, there is the additional dollars being added from the participants payroll deductions. Next is the growth of the investments selected by the account’s owner. The program requires the account owner to decide how the assets of the account are invested, but their choices are limited to a small number of mutual funds provided by their plan administrator.

When we entered the twenty-fist century the total value of the 401k program was $1.7 trillion. During the years from 2000 to 2026, the S&P 500 index grew 4 and a half times. Sevent-six percent of all 401k accounts contain equity mutual funds and as we entered 2026 the total value of the 401k assets exceeded $14 trillion.

It is impossible to calculate what percent of this impressive growth in 401k assets can be attributed to payroll deductions and how much to invest gain. But let’s assume that the gain from the investment portion is a meager 25 percent of the total. That translates to $3.5 trillion added to workers retirement accounts due to prudent investing.

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When I was a kid, our family car had air conditioning, It was a little triangular shaped window that you flipped around and it blew air on your face. Our family car also had power windows. There was a crank on the door and you were the power. Fact checking involved going to the library and digging through 28 volumes of the Encyclopedia Britanica. But that was then and this is now. My grandkids can’t get out of bed without checking their cell phone. Technology is everywhere and more is on the way in the form of the newfangled AI contraption.

Not to be left in the dust, the marketing mental giants of Wall Street have decided to jump on the AI bandwagon. A recent article in the Wall Street Journal outlined how the legacy Wall Street banks are using AI to create NEW investment strategies for the wealthiest clients? Oh, and by the way, it is Wall Street's favorite new way of making money. The WSJ article quoted the managing director of one of the new hi-tech as saying, “Portfolio managers and financial analysts cost money and get bonuses. Computers don’t.”

Before you run out and bet the farm on the latest and greatest new AI technology, let me point out to you that we've been down this road before, and we learned a long time ago that this dog don't hunt. One issue the WSJ article didn’t address was how well these snake oil computer programs perform. To quote Groucho Marx, they're like an ugly stripper: They want to reveal as little as possible.” Because these new funds are nothing more than renamed hedge funds with bigger computers, we can sneak behind the curtain for a glance at how they may perform. Last year, 20% of all of the nation's hedge funds declared bankruptcy and went out of business.

To prove to you that the more things change, the more things stay the same, let me tell you the story of the 25 million Gen Xers who, on average, have amassed $583,800 in their 401k by doing simply, non-technical things. They bought low cost index funds, ignored the Wall Street mavins jibber jabber and just hung on to them for more than a decade. Index funds are the 401k investment equivalent to the triangular air conditioning window on my family’s 1949 Ford.

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