Father of the 401(k) Says the System Is Broken—but Fixing It Could Help You Buy a House

Ted Benna, widely hailed as the father of the 401(k) retirement plan, wants to shake up the system he helped to create, to help those who are benefiting from it least. 

“We've reached a point now where many middle- and low-income employees can't afford to have money taken out of their paycheck,” Benna explained while speaking to Realtor.com® by phone.

In the current economy, he noted that more money than ever is needed to go toward essentials like food, education, healthcare, and, of course, homes.

“We have a very large segment of a population that has no assets. They've never had an account that's been invested for their benefit.”

His solution? A new savings plan he’s dubbed Radish. The plan would function as an employer-funded incentive program that lets companies deposit money into an account for workers who hit their performance goals on a yearly, monthly, or even weekly basis. It's not a replacement for the 401(k), but rather a supplement, which would benefit both employee and employer.

The idea presents a fascinating dichotomy, especially for prospective homebuyers attempting to balance saving for retirement and saving for a down payment. 

Could Benna’s latest idea be a new pathway to homeownership?

Understanding this new 'retirement plan' 

In the late 1970s, while operating a small benefits consultancy, Benna conceptualized the framework for what is recognized today as the 401(k).

Decades later, trillions of U.S. dollars flow through the system, allowing millions of Americans to leave the workforce after years of saving. 

Benna concedes that retirement accounts have “turned a lot of spenders into savers,” but these days he believes 401(k) plans more greatly benefit higher-paid professionals than workers with the greatest need to save.

So a new idea came to him two years ago. Very basically, Radish functions as a tax-advantaged 401(a), similar to a profit-sharing plan.

“Employees will receive contributions without having to have money deducted out of their paycheck,” Benna explains. And for employers, because contributions function as deposits into a qualified retirement plan, they avoid "payroll drags" like FICO, unemployment, and workers' compensation

Putting the onus on the employer to initiate the funding over the employee, Benna believes, would encourage workers to not only develop better saving habits, but also motivate them to perform at their best. 

But the impact of Radish, in Benna’s mind, goes beyond saving for retirement.

“Rather than focusing on 20 or 30 years, to build for your retirement, I want it to be more of an emergency savings type of thing where they could dip into it and access it when they had shorter-term financial needs. That's the way it's designed.”

A good example? Buying a home. 

When can you withdraw from 401(k)—and should you for a home

Pulling money from a 401(k) has long been considered a financially risky move.

Many financial experts have strongly cautioned against the idea—including Harrison Beecher, managing partner of Washington, DC–based Coalition Properties Group. He told attendees at a National Association of Reators® event to advise clients carefully about tapping into retirement funds for down payments. 

"The same way we have an amortization schedule on a mortgage, people should be looking close at that time value of money that they're leveraging to buy a house," Beecher said.

“These accounts can help build reserves in the long run, but the calculation changes if someone needs to withdraw the money to pay for the home, because then taxes and possible penalties come into play,” explains Evan Mills, a financial advising analyst with Scholar Financial Advising LLC. 

“That's where the fine print really matters. If you have a retirement account but you break the glass to pay for a house, that employer benefit is getting tapped too early, and the time those funds could have compounded is cut short.”

However, Benna actually doesn’t thinking pulling from your retirement funds early is such a bad move. Rather, he advises planning out your purchase wisely to make the most out of your tax situation.

“The best way to do this is to withdraw the amount needed during January and to complete the purchase in January also,” he said. “That way the mortgage interest and property taxes should offset the additional income taxes required due to the withdrawal.”

Withdrawals from 401(k) accounts are generally taxed as ordinary income, which could push you into a higher tax bracket. Additionally, a 10% early withdrawal penalty applies on withdrawals before age 59½, unless you meet one of the IRS exceptions.

One of those exceptions is buying a home.

“Withdrawals are subject to income tax. However, the 10% early withdrawal penalty does not apply to the first $10,000 used for a first-time home purchase,” Benna explains. 

This is where 401(k) accounts and Benna’s Radish plan would be similar—but there are additional benefits in using the latter.

How Radish can help homebuyers

When evaluating a prospective homebuyer, mortgage lenders primarily look at two things: capital (down payment savings and debt-to-Income ratio, or DTI) and credit (work history and credit score).

On paper, Radish appears to influence both. 

For starters, a solid work history is one of the many factors lenders look at when underwriting a mortgage. You need to be able to prove you have enough income coming in to manage your payments. 

Given that Radish’s premise is rooted in performance compensation, the hope is that being monetarily rewarded regularly would be a strong motivator for employee retention. 

“The concept is based strictly on continuing employment. You stay employed, you get Radish,” says Benna.

Additionally, for hourly or lower-salaried employees, saving a lump sum for a down payment is often the single biggest hurdle to homeownership, especially now.  

For four straight quarters, the standard down payment has seen a steady decline, dipping to 12.8% in the first quarter of 2026—a drop of 1.1 percentage points from the previous year, reports Realtor.com. 

But the median currently stands at $23,400. Saving that much has been the hurdle most people are having difficulty with given the current state of the economy. 

The personal savings rate fell to 2.6% in April 2026, the lowest level in nearly four years, according to data from the Bureau of Economic Analysis. It’s the second-poorest showing since the height of the Great Recession.

There’s also the question of a person’s DTI. 

“The principle is that DTI is about your monthly debt relative to your qualifying income,” Mills explains. “Routing incentive pay into a tax-deferred account rather than taking it as standard W-2 wages generally isn't going to help your borrowing power the way a normal raise would, because that raise would show up in the gross income underwriters look at.”

While that may be, Mills concedes that the Radish program would help build assets a person might not have otherwise saved—and that’s the point, according to Benna.

Radish creates forced asset accumulation without taking a bite out of a worker's immediate take-home pay—which could be used as down payment savings. 

“It could definitely help,” Benna agrees. “Typically we're expecting the contributions to range from $1,000 to maybe $4,000-$5,000 a year per employee. Over a five-year period of time, with money accumulating, you could have what’s needed for a down payment.

“Might not be the only answer, but certainly could help.”