5 Reasons Why Universal Life Insurance Beats Your 401K

5 Reasons Why Universal Life
Insurance Beats Your 401K

Universal life insurance is a relatively new concept that many people have interests in because of the potential for retirement benefits. When it comes to investment, there is a risk associated with specific universal life insurance policies. For some people, the risk is well worth the reward when you get life insurance guarantees and discretionary investment retirement funds.

What is Universal Life Insurance?

A universal life insurance policy is a mix of term life insurance and an opportunity for investment savings. Not only do you have the necessary life insurance protection, but you also have the freedom to invest which gives you the flexibility to manage your portfolio long-term.

A portion of your monthly premium payment goes toward your death benefit. The other part goes toward your investments which grow in value. Eventually, your finances will cover the cost of your life insurance premiums which could provide coverage over your lifetime.
There are 4 types of Universal Life Insurance
An IUL enables a policyholder the opportunity to use cash values for either an equity index account or a fixed account which gives you more freedom with the stock market. You have the option for a guaranteed and non-guaranteed policy.
A traditional policy provides a death benefit and an investment portfolio. Your rate depends on mortality, cash value, and interest which affects your premiums.
This policy gives people the option to buy coverage based on when death will most likely occur. Plans range between 90 and 121 years of age with a non-cash option policy.
Variables offer excellent investment potential as you can invest directly in the stock market. It comes with risk as your cash investment fluctuates as the stock market does.

What is a 401K?

A 401K is a retirement plan offered through an employer that allows you to save. Your employer matches your contributions which helps build the balance over the long term. You have the control over investment strategies but there is an adverse reason to avoid a 401K plan.

If you have an emergency, you cannot use your employer’s contributions before you meet on-the-job work requirements. You can use your contributions, however, but there may be penalties and fees if you tap into your 401K savings before the age of retirement.
Here Are Five Reasons Why Universal Life Insurance Beats Your 401K:
Your Financial Stability Ties To Both Death Benefits And Stocks

One of the most significant benefits of a universal life insurance policy is the knowledge of having a life insurance policy and a cash option for retirement. The ability to invest in stocks will be beneficial when you have investment knowledge. Even without it, you have access to financial investors who know the type of shares that will yield high rewards. Your chances of securing your retirement are high. You also have the option to diversify your investments to enhance the probability of higher gains.
You Have A Cash Option That Builds Over Time

Term life insurance policies do not have cash value, but universal insurance plans do. You can withdraw your savings at any point during your lifetime. This option builds upon economic growth potential and wealth. You also have more flexibility as to your premiums as your cash portion grows.
You Can Take Out A Loan Against Your Policy

Employers are under no obligation to give you loans under the 401K plan. If you have an emergency, you have the option of taking out a loan because you have equity tied to your retirement savings. You do not have a responsibility to repay the amount under this type of insurance policy. If you pass away without compensating the amount, your carrier will withdraw the loan from your death benefit.
Your Investment Is Protected

Employers control your asset investment with 401K accounts. A primary benefit to a universal plan is the minimum guarantees it provides. Your contributions are protected from the stock market as interest grows based on index performance. So, at worst case scenario, you have a zero-growth rate for the year. You also know when your retirement fund is low, so you can gauge when the right time is to retire.
Borrowing From A Death Benefit Is Tax-Free

Did you know that if you borrow from a 401K before you turn fifty-nine and a half that the IRS will charge a 10% penalty? Most of the retirement benefits tie in with economic and government policies which means that your future payments have minimum distribution and age restrictions that are not negotiable.

Required Minimum Distributions (RMD) force you to withdraw assets based on age, so you will receive funds whether you need them or not. Borrowing from the cash value of your universal insurance plan is tax-free as long as it is within the scope of your premium life insurance payments. If you withdraw more than the cash value, the IRS will want their portion. As the IRS does not tax death benefits, your loans are tax-free as well.
While these five reasons to buy universal life insurance are sound, the bonus is that you have a way to supplement your retirement income. If you already have multiple retirement sources like an IRA or a 401K, you can withdraw on those funds earlier in life while saving your universal insurance plan for when the market is favorable. You have the time to fund your policy longer which will help boost the number of finances you have as you age.

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