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Most people today are looking for 401k help. That’s because one of the most popular (if not the most popular) retirement plan is a 401(k) plan. Another popular plan is the Roth IRA. Of course there are more options than this, but these are the two most common.
When choosing between a Roth and a 401k plan, think about what you are trying to do. You are trying to save up enough money so that you can live comfortably in your old age. However, if you plan on doing well, then a 401k will have you paying back more in taxes than you saved. Forget about the employer match for a moment.
Let’s key in on one of the things that you’re always told about these plans. Aren’t you constantly being told that you’ll be in a lower tax bracket when you retire? Think about whether that really makes sense to you. Because, if it’s true, then it means you’re making less money than when you were working. That may seem fine for some people, but adjust for inflation, and you could be broke when you retire! Is that what you really want?
Another option is the Roth IRA. This plan is pretty interesting. Since you contribute after tax dollars, you get tax-free retirement income. While there’s nothing wrong with that, you do have a problem with one particular aspect of this plan: contribution limits. Usually, you’ll find out that you’re going to need to contribute much more per year than what your Roth will allow you to contribute.
In both cases the question is which Government retirement plan is the best? However, no one ever considers whether they need to use a qualified plan at all. We just assume that the tax breaks make it worth it (usually, it’s not enough). According to DALBARinc.com, most investors earn rates of return that are below inflation! If you’re not careful, fees could quickly erode even the modest returns you are getting.
What would be an alternative to qualified plans? High cash value life insurance. Many major banks and corporations have been turning to specially designed life insurance policies as a way to build a “perfected savings” for over 100 years. At retirement, you get all of the money back that you put into the contract plus anywhere between 4-6% interest over that time period. If you die unexpectedly, like any insurance policy, the death benefit will will act to accelerate your savings – that you were not able to actually save – to your family.
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