Investing in a 401k is one of the better ways to save money for retirement. While this is a sound strategy for a variety of reasons, such as the potential for an employer match, there’s something you need to remember:
You can only contribute so much money to your 401k account.
According to the IRS, the 401k contribution limit for employees in 2017 is set at $18,000. Along with this, the IRS also adds the following in regards to the “catch-up contribution” limit:
“The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.”
In other words, regardless of your age, you can only invest so much money in a 401k plan before you have to start considering other options.
While there are a variety of options to consider, such as a traditional or Roth IRA, you should also think long and hard about investing in whole life insurance.
An Eye Toward the Future
Are you at the point where you can comfortably say that you’ll be able to max out your 401k account every year (as long as everything remains the same with your finances)?
If so, you don’t want to wait until this happens to make decisions as to how you will invest your money. You need to have a plan in place, especially if you’re ready to purchase your first (or an additional) whole life insurance policy.
Why Whole Life Insurance?
There are many reasons why whole life insurance is the perfect fit for someone after they have maxed out a 401k, including the following:
- You have no limit on how much coverage you can obtain (for the most part)
- There is no limit on the number of policies you can purchase
- Your whole life insurance death benefit is paid out tax free to your beneficiary
While these are among a few of the better reasons to consider the purchase of whole life insurance as an investment, there’s one more thing you need to know:
You Can Access the Money Tax Free!
Think about it this way: when you borrow from the cash value of your whole life insurance policy, any withdrawal up to the amount of the premiums you have paid is tax free.
Yes, you read that right. You can borrow from the cash value, up to the premium amounts you have paid, without any tax consequences. This concept is illustrated in books like: Bank On Yourself & Infinite Banking.
Conversely, the same isn’t exactly true with a 401k.
While 401k loans are not taxed if you repay the money, here’s something you need to know: if the loan is not repaid when you roll your 401k into an IRA or leave your employer, the borrowed amount is considered a distribution, meaning that you will owe both tax and a penalty (if you are under the age of 59 ½).
What Product Should I Pick?
As a good alternative to an aggressive investment, you can consider something more passive and with guarantees. A product that could fit your scenario is: High Early Cash Value.
This product gives as the name says a lot of cash value at the beginning of your policy. In addition, it still has great performance in the long run.
Investing money into a 401k is one of the best ways to save for retirement. This is especially true if you have the ability to max out your account every year.
If you’re seeking another way to invest for the future, one that’s full of benefits, you should consider purchasing a whole life insurance policy.