Joe Tanner, age 35, is making an annual contribution of $17,500 to his company’s 401(k) plan, and his employer matches the first $2,500. Can you make a case for diverting the after tax cost of the $15,000 beyond the employer’s match into a personal retirement plan?
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Check out the two graphics below:
Click here to view the full illustration.
The IUL has the same $10,500 premium as the after tax deposit to the 401(k) in excess of the employer’s match. Beyond that, the differences are significant:
- Unlike the 401(k), the IUL provides a significant death benefit for Joe’s family.
- Unlike the 401(k), a waiver of premium can be attached to the IUL in the event of disability.
- Unlike the 401(k), tax free cash flow (loans) from the IUL can be accessed prior to age 59 1/2 with no 10% premature distribution tax.
- Unlike the 401(k), the IUL is illustrated to maintain its values through age 95. At the end of the analysis, the IUL illustrates 283% more after tax cash flow plus remaining cash value in excess of $645,000 wrapped up in over $736,000 of death benefit.
The 401(k) doesn’t stand a chance of competing once you evaluate two issues:
- 30% of the money in Joe’s 401(k) belongs to the IRS;
- IUL with participating loans is a very powerful financial instrument.
Conclusion:
Every client with a 401(k) contribution in excess of the company match should consider the IUL alternative.
Further, it does not just apply to a 401(k). Anyone with an IRA, a Keogh, or a 403(b) plan is a candidate for the life insurance alternative. In addition, any employer with a classic profit sharing plan should consider personally-owned IUL as an alternative.
Important Note: Many of you are rightly concerned about the potential tax bomb in life insurance that can accidentally be triggered by a careless policyowner. Click here to read Blog #51: Avoiding the Tax Bomb in Life Insurance.
Licensing
To license Wealthy and Wise and/or the InsMark Illustration System, contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275). Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.
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InsMark’s Referral Resources
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Please mention my name when you talk to a Referral Resource as they have promised to take special care of my readers. My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.
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