Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
These are two very different products that serve 2 different purposes so it can't be said whether one is better than the other.
401k's are generally funded to be used for retirement savings purposes that can be accessed during your senior/retirement years. During your working life, many employers will offer to match all or a portion of the funds you place into your 401k (varying on a number of factors).
The intended purposes of whole life insurance are to create large sums of money quickly in the event the insured dies. It's typically used as a form of protection to pay off debts (so your family is not burdened with those expenses), provide income to a surviving spouse, leave a legacy to the insured's loved ones, etc.
While whole life insurance does build cash value that you can borrow against, it's actually creating a loan against the policy and is expected to be paid back (interest would be charged like you would have on a loan from a bank). Cashing out a policy can be done, but you lose the protection of the life insurance and you may be subject to surrender charges and/or taxes on any gains (cash value amount is higher than total premiums paid into the policy).
When you buy life insurance, you're buying it for the purposes of the death benefit protection - it's not typically considered/used as an investment/retirement savings vehicle.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
The case can be made that a whole life policy is a retirement product. Because of its design it has the advantage of being “self-completing.” That means that if you don’t live to retirement the money will be there anyway for your heirs. Because of the favorable tax treatment of life insurance it can accumulate significant guaranteed cash values which are one of a few guaranteed retirement products available. Often they actually compare favorably to other investments.
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401k's are generally funded to be used for retirement savings purposes that can be accessed during your senior/retirement years. During your working life, many employers will offer to match all or a portion of the funds you place into your 401k (varying on a number of factors).
The intended purposes of whole life insurance are to create large sums of money quickly in the event the insured dies. It's typically used as a form of protection to pay off debts (so your family is not burdened with those expenses), provide income to a surviving spouse, leave a legacy to the insured's loved ones, etc.
While whole life insurance does build cash value that you can borrow against, it's actually creating a loan against the policy and is expected to be paid back (interest would be charged like you would have on a loan from a bank). Cashing out a policy can be done, but you lose the protection of the life insurance and you may be subject to surrender charges and/or taxes on any gains (cash value amount is higher than total premiums paid into the policy).
When you buy life insurance, you're buying it for the purposes of the death benefit protection - it's not typically considered/used as an investment/retirement savings vehicle.