Comparing 401(k) and Life Insurance for Retirement
401(k) vs. Life Insurance: Which Is Better for Retirement?
Hi, I’m curious about some financial planning details. Could you elaborate on how the contributions and contribution limits for a 401(k) compare to the premium payments required for life insurance policies, especially considering my goal is to balance retirement savings with providing financial security for my family?
Answer
The employee contribution limit for 401(k) plans is $23,000 for 2024, but some plans allow what is colloquially referred to as the “mega backdoor Roth.” These premium plans top out at $69,000 of total contributions between employee and employer. These contribution limits assume the employee is under the age of 50 and is not eligible for “catch-up” contributions. Permanent life insurance does not have a fixed upper limit for annual contributions.
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