IUL vs. 401k

Shawn Plummer

CEO, The Annuity Expert

Understanding IUL

Indexed Universal Life Insurance (IUL) is a permanent life insurance policy. It includes a death benefit and cash value component. The cash value is tied to a stock market index, like the S&P 500, but with caps and floors to limit risk. Benefits include:

  • Tax-deferred growth: Earnings grow tax-free until withdrawal.
  • Flexible premiums: You can adjust how much you pay.
  • Loan options: You can borrow against the cash value.

Understanding 401k

401k plans are retirement savings plans sponsored by employers. They allow employees to save and invest a portion of their paycheck before taxes. Features include:

  • Tax benefits: Contributions are made with pre-tax dollars.
  • Employer matching: Many employers match a portion of your contributions.
  • Investment options: Typically includes a range of mutual funds.

Comparing IUL and 401k

Primary PurposeLife insurance + SavingsRetirement savings
Tax BenefitsTax-deferred growthPre-tax contributions
Investment RiskLimited by caps and floorsVaries with chosen investments
Access to FundsLoans against cash valuePenalties before retirement age
Contribution LimitsNo IRS limitIRS limit applies
Employer ContributionNot applicableOften matched by employer

Which to Choose?

  • For Retirement Savings: 401k is often preferred due to employer matching and higher potential for growth.
  • For Flexible Savings & Insurance: IUL offers life insurance with the added benefit of cash value growth.

Related Reading: Can You Put 401k Into An IUL?


Choosing between an IUL and a 401k depends on your financial goals, risk tolerance, and the need for life insurance. A 401k is typically more advantageous for retirement savings, especially with employer-matching contributions. IUL offers a combination of life insurance and savings with more flexibility but typically lower returns. Consider your personal circumstances to make the best choice. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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