Retirement Plans Comparative Table Tax-Free IULs vs. 401(k)s

Retirement Plans Comparative Table Tax-Free IULs vs. 401(k)s

Retirement Plans Comparative Table

Tax-Free is Better.  Retirement Plans Comparative Table Illustrates
Tax-Free is Better. Retirement Plans Comparative Table Illustrates
Tax-Free IUL401(k)403(b) IRA
Tax-Free IUL401(k)403(b) IRA
Tax-Free / Taxable IncomeTax-FreeHeavily TaxedHeavily TaxedHeavily Taxed
Penalty-Free WithdrawalsPenalty-Free withdrawals any age10% early withdrawal penalty under 59 1/210% early withdrawal penalty under 59 1/210% early withdrawal penalty under 59 1/2
Stock Market Losses and Yo-Yo VolatilityNo You don't lose money when markets go down.Yes Unless invested in CD, Money Market or Fixed AnnuityYes Unless invested in CD, Money Market or Fixed AnnuityYes Unless invested in CD, Money Market or Fixed Annuity
Gains Locked In AnnuallyYes You don't give back profits previously earnedNo Unless invested in CD, Money Market or Fixed AnnuityNo Unless invested in CD, Money Market or Fixed AnnuityNo Unless invested in CD, Money Market or Fixed Annuity
Earn a reasonable rate of returnYes You don't lose money when markets go down. Never digging out of an investment hole4.MaybeMaybeMaybe
RMDs Required Minimum DistributionsNo Government does not tell you when to withdraw money.YesYesYes
2014 Contribution LimitsNone Great for catchup Cannot make a single payment$17,500 401(k) elective deferrals $5,500 catchup if you are age 50 or older. annual compensation limit $260,000$17,500 403(b) elective deferrals $5,500 catchup if you are age 50 or older. annual compensation limit $260,000$5,500 (6,500 if you are age 50 or older) or your taxable compensation for the year.
Tax-Free Death BenefitYes Could be substantial vs. IRA, 401(k) or 403(b)No, plan balance is taxable to beneficiariesNo, plan balance is taxable to beneficiariesNo, plan balance is taxable to beneficiaries
Premium Financing and leverageYesNoNoNo
Government Controlls How much you can contribute; when you must take money out.NoYesYesYes

The Retirement Plan Comparative Table illustrates that Tax-Free is Better.  The Tax-Free IUL is more flexible.  Tax-Free penalty free withdrawals at any age for any reason.  Larger contributions are allowed, so it works better at a retirement catch up strategy.  It is also safer, as you don’t lose money when the markets go down.  Your qualified plans could be subject to substantial market risk.

Watch the Retirement-Toolbox Videos to learn more about the Tax-Free IUL.  It is also considered a Tax-Free Pension Alternative and Living Benefits Life Insurance.

The Tax-Free IUL is a life insurance policy with greater focus on living benefits than on death benefits.  The Living Benefits make it a great tax-free pension alternative.

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