Blog #9 – Comparing an IBC Policy to a 401-k Plan

Since 401-k plans are the most common option for Americans to accumulate funds for retirement, I would like to compare them to an IBC policy on four key elements.

A)   Taking a loan. When you take a loan from a 401-k plan, it involves liquidating assets from your plan and therefore, you will immediately stop earning interest and/or investment income on those assets. Furthermore, you are required to pay the loans back within five years, or the outstanding balance becomes taxable and you may also have to pay a 10% penalty if you are under age 59½. Also be careful if you lose your job or leave your company before reaching age 59½ since in most cases you are required to pay your loans back in full with interest in 30 to 60 days, or you will have to pay income taxes on it, plus a 10% penalty.

When you take a loan from an IBC policy, you are borrowing against your cash value, using it as collateral for your loan. The amount of cash that you receive as a loan does not actually come from the cash value of your policy, but from the general account of the insurance company so the cash value in your policy continues to earn guaranteed interest and dividends while the loan is outstanding. Also, you are in complete control in how and when you pay your loan back.

B)   Taking income. In spite of the fact that it is supposed to be your money, you may only withdraw money from your 401-k plan without paying penalties between the ages of 59½ and 70½. That’s right, for only 11 years. Before age 59½ you will have to pay a 10% penalty and after age 70½ you are required to take distributions whether you need them or not.  If you don’t take distributions, you are penalized with 50% of the difference between what you were supposed to take and what you actually took. And you thought it was your money!

You can take withdrawals from your IBC policy when and how you wish. There are no penalties for early, late, or no withdrawals. You always have use and control of your money.

C)   Guarantees and Predictability. Since your 401-k plan invests mainly in the market, there are absolutely no guarantees or predictability of where your account is going to be at any point in time. As a matter of fact, you could lose part or all of your money and it may happen close to your retirement; does this give you the peace of mind that you look forward in your golden years?

With an IBC policy your cash value grows in a guaranteed and predictable way year after year so at any given time you know the minimum guaranteed cash value that you will have in your policy. In addition, although not guaranteed, your policy will earn dividends that will make your cash value to grow even more. As a note, the mutual life insurers that we use have never failed to declare dividends in substantially more than 100 years.

D)   Tax Consequences.  Withdrawals from your 401-k plan are taxable. If tax rates increase in the future, as most experts believe they will, and you are successful in growing your plan, you will end up paying higher taxes in a larger amount.  It is a big mistake if you believe you will come out ahead tax-wise by deferring taxes.

How do you obtain tax-free retirement income from your IBC policy? One alternative is to take policy withdrawals until the amount withdrawn equals the premium payments made to the policy and from that point on you take policy loans against your cash value. Your income is not taxable.

Now that you have been exposed to the superiority of an IBC policy to a 401-k plan, what are you waiting to stop your contributions to your 401-k plan and redirect them to a properly-designed IBC policy?

If you would like to learn how you can grow a substantial amount of cash that you have access to at any time without penalties, is unrelated to the stock market, and will generate income that is not included in your tax return, visit our website at / or feel free to email us your questions at or call us toll-free at 1-844-443-8422.

Isis B. Palicio, LUTCF, MBA
Pedro A. Palicio, MBA, Ph.D.
Infinite Banking Concepts® Authorized Practitioner

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