The 401K, a wolf in sheep's clothing...
Updated: Nov 4, 2022
I've been wanted to write this article for a while. I hear so many 25 to 35 year old adults say the same thing when the topic of Life Insurance comes up. "What do I need that for? I’m such and such years young" or "I don’t have any kids, so if I die it doesn’t matter."
This is one of the greatest misconceptions about what Life Insurance is. Most people think it’s something you pay for every month and if you die someone gets a payout. While that is true, at a very high level, there is so much more to this vehicle. Let's peel back the labels...
I always ask them, "Well do you have a 401K or personal bank account to save money for the future?". The answer is usually “Yes exactly so I will use that when I retire”. I laugh.
While 401K’s are a good tool, IF and only if there is a match from your employer, that's free money so take it. However, saving and retirement are a 3-legged stool, that 401K is only one of those legs. Your personal saving is the 2nd, which most people in this country have roughly $1500 in their bank account at any given time. I don't know about you but that is not enough for me to live or retire on. Pensions are the 3rd leg. Oh, but what if you don’t have a pension,? Well not many people do these days, with Unions on the decline and companies trying to cut costs most pension are a thing of the past. This is where you have to take responsibility for your own future, your own 3rd leg of savings and retirement, add another vehicle for the 3rd leg which is.... (drum role) Life Insurance!
The truth is, Life Insurance can be one of the most beneficial financial tools you will use in building wealth. Did you know that Life Insurance is a vehicle that builds cash value, similar to an index fund on your 401K, except with a built in benefit in the case of death and can have zero downside risk within the market when properly executed.