The retirement questions you should be asking

While nearly every facet of our daily life has been upgraded through modern technology, unfortunately, the opposite is true in my world of finance, where America's most widely used way to prepare for retirement has been unchanged for nearly four decades.

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The 401(k) changed everything when it first came onto the scene back in 1981, and the change stopped there. Gobbled up immediately by corporate America as a much cheaper employer expense than the old defined benefit pension plan -- where the risk and responsibility was born 100% by the employer -- we quickly and irreversibly moved forever to the defined contribution plan, where the risk and responsibility is born 100% by you, the employee.

And this "primary" retirement account happened by accident. It was not designed nor intended to be our principal retirement vehicle. Uniquely utilized for the first time by a benefits consultant in 1981, this new plan provided employees a way to get a current tax break on their earnings that they earmarked for retirement while enticing them to take part by offering a small employer match.

Today we have a lot of 401(k) cousins, like the 403(b), the 457, the SIMPLE, the SEP and the IRA -- but they are all pre-tax retirement accounts.

While it was originally sold to America as a "portable" retirement plan that would go with you if you changed jobs (the company pension didn't), where you could choose your investments (translation: no guarantees and all the risk is on you), the real undeniable attraction was lowering your tax bill now to save for your future retirement.


It was a no-brainer, America was hooked. Fast forward to 2019, and we still are. But why?

The things that made the 401(k) make sense in 1981 are nowhere to be found today. Top tax rates of 70 percent, very low federal debt of $980 billion, and Baby Boomers that were only 16 to 34 years of age all caused pre-tax wealth building to make sense then.

But today, with federal debt of $22 trillion, the looming retirement of 70 percent of the Baby Boomers en masse and historically low tax rates why would we choose to defer paying the tax now? Why would we not leverage these low rates, likely never to be seen again?

Why would we trade known low rates now for the unknown future rates that mathematically need to go up substantially? Why are Americans still being advised to maximize these pre-tax retirement accounts? Why aren't these questions being asked?

I've asked. The consensus answer: It may not be the ideal retirement plan, but it is all most Americans have access to and using it is better than nothing. Huh?

We demand a better smartphone immediately, but we tolerate a sub-par nearly 40-year-old happened-by-accident retirement plan because most Americans do not have access to anything better than what they can get through their employer?

Reject that. Seek what is better, not merely convenient. Seriously question pre-tax wealth building beyond the employer match in 2019 and go further by considering maximizing your leverage of these historically low tax rates now by repositioning your pre-tax retirement balance -- a taxed forever account -- to an after-tax, tax free account.

We are Americans, the most innovative people of modern time, and we cannot afford to be apathetic about building our retirement wealth, especially in 2019.

Rebecca Walser is a tax attorney, a certified financial planner, and the author of Wealth Unbroken, who specializes in the strategic planning of maximizing lifetime wealth while minimizing tax through her practice, Walser Wealth Management ( She earned her juris doctor degree from the University of Florida and her Master of Law degree in taxation from New York University.  She is a frequent national media contributor.