Three Reasons to Choose Life Insurance Instead of a 401K

401K, whole life insurance, term life insurance, tax free

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There are multiple reasons you should consider a banking policy instead of 401K for your retirement. Though a life insurance policy might not be a traditional solution for a cushy retirement, it certainly is one of the safest options.

Your Money Is Guaranteed Full Protection

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, markets will still tank at some point. It’s simply the nature of the economy.

A life insurance policy provides protection from market volatility, meaning that your cash value won’t be affected, regardless of how much the market drops. A 401K, however, is heavily dependent on the market and is also often more costly in terms of fees as the wisest approach to protect your money is to employ a professional to handle it for you. Even then, there is no guarantee you won’t lose your entire nest egg, whereas a life insurance policy offers you this guarantee.

Guaranteed Growth of the Principle

Even if the returns might not be as “spectacular” as mutual funds, for example, you will still see gains every year. The level depends on the health of the economy but it 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.

Access to Your Money with No Penalty or Taxes

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 401K clearly makes sense, especially since these are only some of the reasons to do so. Other advantages include tax-free dividends and other tax benefits, guaranteed insurance, death benefits and more.

To find more education about these advantages, click the link below.


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