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.

Think about what you are trying to do when making a choice between various Government plans. Usually, you are attempting to save up enough money so that you can live comfortably in your old age. However, if you plan on saving enough for retirement, then a 401k will likely have you paying back more in taxes than you saved. Even an employer match may not help.

Focus on one of the “facts” you are constantly told about these plans. You are told that you’ll be in a lower tax bracket. Do you think that that makes sense? If that were true, then it means that you are making less money than you are now. After you adjust for inflation, you could be living a very different lifestyle than what you had first imagined. What I’m trying to say in plain English is that if you are in a lower tax bracket it’s because YOUR BROKE! Do you want to be poor in retirement?

Of course, the other most popular option is the Roth. This plan works a little differently than a traditional qualified plan. You contribute after tax dollars and when you retire you don’t have to pay tax on any of the gains. It’s a good deal, except for one thing. You can’t contribute anywhere near the amount you’ll probably need to save. This can be problematic since most people expect unrealistic rates of return on their investments…the result will be a lower than necessary savings rate.

In both cases debate is really about 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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