UPDATED: May, 2026

How These Two Tools Can Work Together

A 401(k) and Bank On Yourself don’t have to be an either/or decision. Each one brings something the other doesn’t.

A 401(k) gives you pre-tax contributions and, in many cases, an employer match. If your employer matches contributions, that’s an immediate return worth capturing.

A properly structured and continually funded whole life policy gives you guaranteed, predictable growth that isn’t tied to the market, flexible access to your cash value, and the potential for tax-free retirement income under current tax law. Think of it as your “safe money” foundation: the portion of your financial strategy where, when you pay your premiums, growth of your cash value is guaranteed, your principal is locked in and doesn’t decline due to market movement, and you have access on your terms. Plus, whole life insurance offers an important survivor benefit for your beneficiaries.

Together, they give you both growth potential and a guaranteed floor, both tax-deferred and tax-free income options, and access to capital when you need it without being forced to choose between penalties and paperwork. Market-based accounts give your money room to grow. A whole life policy gives you a foundation you can count on regardless of what the market does along with a death benefit to help your family.

Four Reasons Why Your 401(k) and IRA Are Not Enough

At one time, 80% of private sector workers had a pension that promised their grandfather or great-grandfather a certain amount of money every month in retirement. In 1978, Congress added Section 401(k) to the tax code, creating a tax-deferred way for employees to augment their pensions. These new plans were never intended to replace company pensions, but that’s what’s happened. By 2023, only 15% of private sector workers had access to a company pension, and only 11% participated in one.

People aged 55 to 70 today are the first generation to have been left to prepare for retirement on their own using do-it-yourself plans, such as 401(k)s, 403(b)s, IRAs, and similar government and employer-sponsored plans, according to the Boston College Center for Retirement Research. Since 1978 , we’ve shifted from retirement security to retirement insecurity, as companies have discovered that it’s more cost-effective to offer a small matching contribution to an employee’s 401(k) plan than to fund and manage a company pension plan.

Reason #1: No Predictability

It just makes sense that you want to know how much money you’ll have when it’s time for you to retire, right? Can you predict that with a 401(k) and an IRA invested in the market? Nope.

Why? Because we’ve been told that the best way (if not the only way) to grow a substantial retirement nest egg is to invest the money in our government-sponsored retirement accounts (like 401(k)s, 403(b)s, IRAs, SEP-IRAs, and Keogh Plans) in the stock market. On a predictability scale of 1 to 10, how would you rank the stock market?

Saving is what you do with money you can’t afford to lose, so you know for sure the money will be there when you need it. Investing is what you can do with money you can afford to lose. There’s nothing wrong with investing. You’re taking a risk with the hope of making a gain. But let me ask you: Is the money in your retirement account money you can afford to lose? If you can’t afford to lose it, should you be investing that money or saving it?

Investing offers growth potential, but it comes with volatility and unpredictability. If your retirement money is invested in the market, you have no way of predicting your plan’s value when you want or need to tap into it. That’s why combining risk-based strategies with a guaranteed financial foundation, like the Bank On Yourself strategy, can make better sense for your long-term success.

What about target date funds (TDFs)? Aren’t those safer? TDFs are mutual funds that invest in a mix of assets. They’re designed to shift from higher-risk to lower-risk investments as you approach your target retirement date. Under provisions of the Pension Protection Act of 2006, eligible workers can be automatically enrolled in 401(k) plans (unless they explicitly choose to opt out of participation, which almost no one does), and your employer can invest your retirement funds without your permission. TDFs have emerged as by far the most popular default investment—the one your employer automatically chooses for you.

How Well Have TDFs Performed?

In 2022, target-date funds for people expecting to retire in just 3 years lost 15.2% on average, according to Morningstar’s 2024 Target-Date Strategy Landscape report. The report noted, “The findings cast more light on the vulnerability of investors who count on target-date funds as a source of income early in retirement.”

Do you believe there will never be another global pandemic, supply chain debacle, global war, trade war, or anything that could send the market reeling again? Hmmm

Real Predictability with Bank On Yourself

The money in your policy remains secure due to the protections, prudent business practices, and regulations built into the DNA of the life insurance industry. The guaranteed annual growth of your money in a Bank On Yourself policy is predictable, not some guesstimate. And you’ll know upfront exactly how much growth that will be without all the disclaimers in flea-sized font of some prospectus . On top of that, you have the potential for dividends. Dividends on a whole life insurance policy are not guaranteed.

As people get older, they’re typically advised to take less risk with their money to avoid losing significant amounts right before or during retirement. Following conventional wisdom means accepting meager growth in exchange for more stability.

But the Bank On Yourself strategy turns that entire notion upside down. You pay your premiums and your cash value is guaranteed to grow—and it does so without your taking on more risk.

Reason #2: No Control

When you put your money in a government-sponsored retirement account, it’s like you’ve sent it to a maximum-security prison. Someone else calls the shots now, and you barely get visitation rights! In most of these plans, the prison wardens (Congress and your company) will determine:

1. How much you may put in your plan
2. What you can and cannot invest in
3. If you can borrow from your plan, how much you can borrow, as well as when and how you must pay it back or face penalties
4. How long you must wait before you can access your money
5. When you must start taking out your money, and how much you must withdraw (and pay taxes on)

Penalties for running afoul of these regulations can be costly. Withdrawal rules are particularly restrictive: You’ll pay penalties for taking most distributions before you turn 59½, and you’re forced to start taking Required Minimum Distributions (RMDs) in your early 70s (which might push you into a higher tax bracket)—whether or not you want to or need to. Why does the government do this? Because they can’t afford to wait any longer to start collecting those taxes they let you defer all those years.

Roth plans don’t have the Required Minimum Distributions requirement. However, a Roth plan still has restrictions about 1) how much you can put in each year, 2) how soon you may withdraw your earnings, and 3) where you can invest it.

No, Virginia, you do not control the money in your 401(k), IRA, or any similar plan. Congress can—and does!—change the rules any time it wants! And you have no recourse. And your company can change your 401(k) plan’s rules and participation rates with little or no notice, throwing years of careful planning into chaos.

What about self-directed IRAs? People mistakenly believe that self-directed means you don’t have to operate within government controls and restrictions. Not so. A self-directed plan operates under the same rules and restrictions as a traditional IRA, and the law prohibits many transactions.

Oh, and one more thing you can’t control: Congress frequently floats proposals to take more control over government-sponsored retirement accounts.

401(k), IRA, and similar plans are an incredibly attractive target for government control and ownership. Why? For the same reason, notorious holdup man Willie Sutton gave when asked why he robbed banks: “That’s where the money is!” Congress created and tracks these plans, and knows where your money is and how much you have there.

Back in Control with Bank On Yourself

Unlike government-controlled retirement plans, life insurance policies are private contracts. With a Bank On Yourself-type policy, the income you take out and the growth of the policy are generally not even reported to the IRS as long as your policy remains in full effect under current tax law. Your privacy is protected. So, when the government is looking to get its hands on more money, odds are they’ll go for the lower-hanging fruit in the retirement plans they sponsor and control.

In addition to being private, life insurance contracts are also “unilateral” contracts. That means the company can’t change any aspects of your contract unless you agree to it. That’s the law.

As a policy owner, you control the money accumulating in the policy. You determine the amount of premium to pay when you buy the policy. The upper limit is determined by your income, assets, and life insurance needs, not a government-imposed limitation.

You decide when and how to take your retirement income without facing restrictions or penalties for “early” withdrawals or waiting “too long.” Unlike the mandatory minimum withdrawal requirements in tax-deferred retirement plans, you won’t pay penalties for taking “too little” each year.

Wouldn’t it be better if you were in charge of the money you’re saving for retirement? Add the Bank On Yourself strategy to complement your retirement plan and gain better control over your retirement savings.

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Reason #3: Restricted or No Access

One crazy thing about employer-sponsored retirement plans is that you have very little access to your own money! Shouldn’t you be able to get your hands on the money in your retirement account quickly and easily when you need or want it without penalties? The government and plan sponsors that control your plan don’t think so.

With 401(k)s, IRAs, and similar plans, you typically have to sell the investment you were counting on for growth to get your money out. You’re out of luck if it’s a bad time to sell. You have to bite the bullet and potentially take a loss. And if you need to withdraw money before age 59½, you’ll usually pay a penalty in addition to owing taxes on it. A Bank On Yourself type whole life insurance policy allows access to funds without penalty.

Americans increasingly use their 401(k)s to cover living costs through loans and hardship withdrawals. A 2025 Bankrate report found that a majority (59%) of Americans can’t even afford a $1,000 emergency expense. They should be able to get what they need from the money they’ve saved, right? A Bank On Yourself type policy provides a cash reserve for you to tap when you need funds. And, you can restore those funds when you repay policy loans.

Some 401(k) plans allow you to borrow money from your account, but don’t make it easy. Taking a loan from your 401(k) at a typical company requires a 13-step approval process. And if your plan does permit borrowing, Congress imposes strict and low limits on how much you can borrow, how long you can borrow it for, and how often and how large your loan repayments must be. If you lose your job or leave your company for any reason while you have a loan outstanding (and you haven’t reached the magic age of 59½), you’re required to pay your loan back in full with interest by the due date of your next federal tax return, or you’ll have to pay income taxes on the money you borrowed plus a 10% penalty. So you have less than four months to pay it all back if you get laid off or fired on December 31st!

Wait! Wasn’t this your money in the first place? But when your money is in the government-controlled retirement plan jail, you can’t even get it out on parole without significant hassles and penalties!

When you take a loan, ultimately, you contribute less to your retirement plan because a portion of your new contributions goes toward paying off the loan. Some plans don’t even allow workers to make any new contributions until they’ve paid off their loans. Others require workers to wait a set time before contributing again after taking a loan or withdrawal. If your employer matches contributions, you’d be taking a double hit.
And you’ll take a double hit in taxes, too. Hit #1: You earn and pay taxes on wages and use those after-tax funds to repay the loan. Hit #2: During retirement, you pay taxes again when you withdraw those same funds. If you’re in the 25% federal tax bracket, twice the tax is pretty darn painful.

Oh, and by the way, borrowing from your IRA is verboten. The plan custodian will report it to the IRS, and the value of your entire IRA immediately becomes taxable. Even using your IRA as collateral for a loan triggers taxes.

Borrowing from your Roth plan or using it as collateral for a loan is also prohibited. At least with a Roth plan, you can withdraw the contributions you made to the plan without any penalties or taxes (because you fund a Roth plan with money you’ve already paid taxes on). However, if you withdraw your growth or earnings before you turn 59½ and before the account is 5 years old, that withdrawal will be subject to taxes and may be subject to penalties. Of course, any money you withdraw will no longer earn you any interest or investment income.

Easy Access with Bank On Yourself

Bank On Yourself gives you control over your policy’s equity (cash value). You can take a loan against your equity whenever you want, for whatever you want, with no government restrictions. Unlike with 401(k) plans and IRAs, there are no penalties for early withdrawals, late withdrawals, or no withdrawals. You can get the money you need when you need it, and you can repay it and restore capital on far more flexible terms. You have better control and flexibility.

It really is your money, as it should be!

Reason #4: The Tax Surprise Waiting

Do you know what surprises the IRS has in store for you when you take money out of your tax-deferred retirement plan? Nope.

Most people look at their retirement plan balances and think it’s all theirs. They tend to forget they’ll owe the IRS taxes on every penny paid in and every penny of growth they’ve deferred all these years. Is this a big deal? Boston College’s Center for Retirement Research says, “It’s a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had [in their tax-deferred retirement account].”

Conventional wisdom says you’ll come out ahead by deferring taxes. After all, doesn’t that mean your entire contribution can go to work for you immediately? Unfortunately, like many personal finance assumptions, this isn’t true. According to the Society of Actuaries, if tax rates remain the same, “It doesn’t make any difference whether the taxes are taken away from you at the beginning (before you put the money in a financial vehicle) or at the end (tax-deferred). It’s the same fraction of your money that is left to you.” (What Is The True Value of Tax Deferral? May 2003)

Deferred taxes might sound good today, but it’s like putting off a visit to the dentist. The problem may only get worse. If the tax rates get lower over the years, you might come out ahead.

However, most people, including many financial experts and economists, believe tax rates will head higher, not lower, over the long term. And your retirement could last 20 to 30 years or more. The reality is that you may be sitting on a tax time bomb. Simply put, the government will need more money in the years to come for several reasons. Social Security and Medicare’s financial condition has deteriorated. In 2032, retirees will receive reduced Social Security benefits if Congress doesn’t fix funding issues for the program. The Medicare trust fund is expected to be depleted in 2033!
By 2050, the U.S. is projected to have roughly 82 million people age 65 and older, and the strain on Social Security and Medicare will be driven by fewer workers supporting more retirees. Where do you think the money to pay for that will come from?

Some folks think it should come from the “wealthy.” If you made $95,000 or more in 2023, you’re in the top 25% of all wage earners. And if you made $170,000, you’re in the top 10%. Some experts argue that taxing the top 25% can’t possibly generate enough revenue to cover the country’s debt, Social Security, and Medicare. If they have to increase taxes on the top 50% of wage earners, just $50,000 a year will put you in their sights.

And what about the national debt? Washington has been kicking the debt can down the road for decades. As of June 2026, the national debt was $39.2 trillion—which comes to $355,963 per taxpayer! (For a painful wake-up call, check out USDebtClock.org.)

We have a long way to go to cut the nation’s debt. More people are drawing on Social Security and Medicare every year, and even if one administration cuts taxes, future administrations can raise them again. You must prepare for where tax rates will go over the next 30 years. We have asked thousands of people in our seminars, webinar workshops and personal interviews what they think will happen to tax rates over the long term. Virtually all of them believe tax rates will have to go up.

So, if tax rates do go up and you’re successful in growing your nest egg, you’ll be paying higher taxes on a bigger number. Could it make more sense to pay your taxes now when tax rates are relatively low, and you know what the tax rates are? And what if the government changes its mind about letting you defer taxes in your plan? The Center for Retirement Research released a study in January 2024, showing the impact of reducing or eliminating the tax deferral for 401(k) contributions, which it says would add nearly $200 billion annually to the government’s coffers. Will that happen? Who knows? But you have absolutely no control over it, meaning that your carefully constructed financial “plan” may be just a crapshoot.

Bank On Yourself Can Minimize Your Lifetime Tax Bite

With a properly structured and consistently funded Bank On Yourself-type policy, it’s possible to take retirement income without taxes due under current tax law. You accomplish this through a combination of withdrawals (often called partial surrenders of paid-up additions) and policy loans against your cash value while ensuring the policy doesn’t terminate. It’s crucial to keep the policy in effect to preserve this important benefit.

Of course, tax laws can change, but the following tax benefits of permanent life insurance have withstood the test of time:

1. You could take a retirement income with no taxes due. In the most common Bank On Yourself-type policy, the tax treatment is similar to Roth plans but without the restrictions of a Roth plan. You pay no taxes to slow your money’s growth on the gains you have in the policy’s cash value (and your gains are guaranteed!).

   Then, like Roth plans, you can access accumulated funds in your cash value with no taxes due. Here’s how: Dividends you leave in your policy to be reinvested are not taxable, and dividends you withdraw from your policy are not taxed, provided the amount withdrawn never exceeds your cost basis.. If you get close to having withdrawn your cost basis (the money you put in), you can switch to borrowing against your cash value, with no taxes due on policy loans, as long as you don’t let your policy lapse. It’s very important to keep the policy in full force and effect.

2. You could get tax breaks if you’re a business owner. Professionals and other business owners are increasingly using Bank On Yourself to become their own source of financing for business vehicles, equipment, office buildings, and more. When you finance business expenses this way, you may qualify for tax deductions for interest and depreciation. Consult your accountant for additional details.
3. The death benefit passes to your beneficiaries – your loved ones and favorite charities – income tax-free. It also avoids the expense and publicity of passing through probate.
4. You could reduce the taxes you may owe on your Social Security benefits, as well as potentially lower your Medicare premiums. Currently, 50% of Americans pay taxes on their Social Security benefits, which often comes as a surprise to them. However, the income you take from a Bank On Yourself policy is not included in the income totals used to determine whether (or how much of) your Social Security check is taxed. It’s also not counted when determining your Medicare premium.