Alternatives To 401ks: Life Insurance Retirement Savings

For years, the 401k plan has been the gold standard for retirement, being used by workers of all professions to save for their retirement.


But what if it isn’t the best game in town?


You’ve worked hard to achieve what you’ve accomplished in your career field. You deserve the opportunity to maximize your lifestyle in your retirement years and have the opportunity to travel or pursue the dreams you’ve had to defer in your work years.


To do that, you’re going to need money, and the best way to ensure you have the funds you need for retirement is to choose the retirement plan that has the best investment and long term tax advantages for you.


The 401k VS Life Insurance

401ks are great for a lot of people because their employers kick in money to the fund as well. Not every company does this however, particularly start-up firms. Also, if you’re self-employed, you’ve got no one else to rely upon but yourself for retirement savings.


Life insurance can be a great alternative savings vehicle for folks trying to save for retirement. Many life insurance policies have a cash value option that allows a portion of your monthly premium to be diverted into a growth fund that you can use to save for retirement.


One of the great things about saving for retirement this way is that should you die unexpectedly, your family will be taken care of. If you’re only saving for retirement, the only money your family will have access to in the event of your death are those retirement savings, which can be negligible if you’re still young. By coupling your insurance with your retirement savings, you plan for both the best and the worst – ensuring that you’ll have money to retire on, and that your family will be financially secure if you don’t live to retirement age.


If the first decades of the new millennium have taught us anything, it’s uncertainty. By using a life insurance policy to save for retirement, you hedge against two unknowns, what life will be like when you retire, and what your family would do if you die unexpectedly.


Tax And Other Advantages

Most 401k plans allow workers to make tax deductible contributions to the plan, however that money will be taxed when you withdraw it after you’ve reached retirement age. With a life insurance policy containing a retirement savings component, you pay taxes upfront, but avoid paying them when you withdraw the money – which has had decades to grow tax deferred and then withdrawn tax free. Bottom line: You end up giving Uncle Sam far less of your hard earned money.


Another key advantage using life insurance as a retirement savings vehicle has over 401k plans is the safety of your investment. Some life insurance retirement policies invest your money in guaranteed principal accounts such as equity indexed contracts, which provide customers with good growth rates and no risk of loss. On the other hand, the risk of non-guaranteed 401K options can wipe out a lifetime of savings.


Depending on your lifestyle and individual financial circumstances, using life insurance as a retirement savings vehicle can be a far more attractive alternative for entrepreneurs and other professionals than 401k plans.


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