“If I were to start over from scratch today with what we know, I’d probably blow up the existing structure and start over.” –Ted Benna, Father of the 401(k)
Quite a powerful realization, but because so many individuals are pushed into using the qualified plan for retirement, they don’t realize that there are better retirement options out there.
However, if you are one of the many with an active 401(k) for your retirement, don’t despair. You too can still opt for the better option when it comes to retirement planning and fiscal security.
There are multiple reasons why a Banking Policy trumps a 401k
A Banking Policy, or Whole Life Insurance Policy, not only gives you a better retirement, it gives your money protection, guaranteed growth, and tax-benefits.
And while life insurance may not be the first thing that comes to mind when you think of how to plan your retirement, it is gaining popularity as many experience how it is one of the safest options to securing your financial future.
Your Money Is Protected
With the recent Global Financial Crisis (GFC) still fresh in most people’s minds, protection is often more important than growth. Unfortunately, the GFC wasn’t a one-off occurrence.
Though it might be some time before a crisis of this level is seen again, markets will still tank at some point. It’s simply the nature of the economy.
A Whole Life Insurance policy provides protection from market volatility. This means that regardless of how much the market drops, your cash value won’t be affected.
For example, during the Great Depression, life insurance companies were among the few that still paid annual dividends.
However, a 401k, is heavily dependent on the market and is often more costly in terms of fees; as the wisest approach to protect your money inside a 401k is to employ a professional to handle it for you. Even then, there is no guarantee you won’t lose your entire nest egg.
A life insurance policy offers the opposite. Your policy is never dependent on the market, so the policy’s cash value will always be where it was the last time you checked.
Guaranteed Growth
Many individuals who understand that permanent insurance comes with interest bearing cash value argue that the return is too low. However, even if the returns might not be as “spectacular” as mutual funds, for example, you will still see gains every year.
And gaining at any rate beats even the potential of loss, especially when you could lose your hard-earned money through no cause or fault of your own.
The level of mutual fund gains depend on the health of the current economy. Some years yield a lot, other years yield very little.
However, gains will be a constant positive rather than a negative in some years. So, you might see only growth rates between 2 and 4 percent but the guarantees and stability offered are much more valuable than the higher rates offered by mutual funds or investing in the stock market, which presents risks that are just as high as the return potential.
Tax-Benefits
Unlike a 401k, you can access the cash value of your life insurance policy at any time and for any reason.
You will not be subject to penalties for borrowing from your own account before retirement, nor will have to face all the obstacles involved in accessing that money.
Choosing life insurance instead of a 401k clearly makes sense, especially since these are only some of the reasons to do so.
Other advantages of a Whole Life Policy include tax-free dividends and other tax benefits, guaranteed insurance, death benefits and more.
– Eric Patterson
Read: Access Your Savings Tax Free
Watch: Preparing for Your Complete Retirement Journey
Listen: The Economy and Your Retirement
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