• BY amfcon
• 15 Dec 2022 INSURANCE

First, let’s make it clear about both policies and what they offer. A 401(k) is a retirement plan which was created by accident. It started when Congress passed the Revenue Act of 1978 and added to the Internal Revenue Code Section 401(k). It allowed employees to avoid being taxed on deferred compensation. In 1981, the IRS issued new rules that allowed employees to fund their 401(k) through payroll deductions, which led to the 401(k)’s popularity. 

Indexed Universal Life (IUL) Insurance is a life insurance plan with a tax-free retirement plan. Some call it the “IUL Investment Plan.” It offers many benefits that many people don’t know. In the very near future, it will be the new 401(k) plan that will provide a higher return on your retirement than from a 401(k). See Table below. 

 Table 1:  401(k) vs IUL Investment Retirement Plan

Next, let’s look at the example of two friends: John and Ron. Both are non-smokers and 30 years old. They work for the hospital. The hospital offers a 401(k) retirement plan with matching contributions. In order to take advantage of free money (matching contributions), both join 401(k) plans. For their families’ protection, they purchase life insurance policies. But Ron met with a financial advisor who educated him about an Indexed Universal Life Insurance/IUL Investment plan. It has an investment component similar to an index annuity and zero loss. This way Ron’s life insurance premium will go to his second retirement. 

A financial advisor told him the advantage of an IUL Investment/College Saving plan over State 529 College Saving Plan. Financial advisor showed him on the Table 2, how his plan will work for him and his children.

Table 2: Tax-Free Retirement Plan and Children College Saving Turns into a Tax-Free Retirement Plan  

Ron and his wife are very happy with their investments. His daughter and son used college saving for their college degree. Both are doing well at their jobs and took over $200 contribution per month for their own retirement plan.

After 30 years – Ron Retired

Started College Saving Plans for Grandkids

Started College Saving and Retirement Plan for Grandchildren: Ron retired at age 65. After all these years of hard work, Ron and his wife are planning to travel the world. Ron has three retirements: 401(k), IUL Investment, and Social Security. Even after all the expenses, they are/will left with more money that they need. So, Ron decided to buy college saving and retirement (IUL Investment) plans for grandchildren. He started each grandchild with $300 per month. Table below shows how much each grandchild will be receiving to pay college expenses and tax-free retirement at age 65. This plan is far better than State 529 College Saving Plan. 

Table 3:  College Saving Turns into a Tax-Free Retirement Plan for Grandchildren