IUL · 10 min read
IUL vs 401(k): What Changes After You Get the Employer Match
IUL vs 401k isn’t a fight — order matters. Take the match first, then compare taxes, fees, RMDs, and access.
Start with the employer match
If your employer matches, take the match first. A 4% match on $90,000 is $3,600 you only get by contributing — no IUL illustration matches a 100% instant return.
For 2026, 401(k) deferrals can go up to $24,500 ($32,500 at 50+; higher catch-up for ages 60–63). Beyond the match is where the comparison gets interesting.
Tax advantage in retirement
Traditional 401(k): deduction now, ordinary income on withdrawals, RMDs at 73 or 75. Roth 401(k) flips timing. IUL premiums are after-tax; loans are generally untaxed if the policy stays in force — with lapse risk.
Fees, downside protection, and access
401(k): fund expense ratios plus plan fees; full market risk. IUL: premium loads, cost of insurance, admin, surrender charges — plus life insurance.
401(k) early withdrawals before 59½ usually owe tax plus 10% penalty. IUL loans have no age penalty but accrue interest. 401(k) loans can come due if you leave your job.
Who should think about an IUL after the match?
Common order: match → HSA if eligible → Roth or 401(k) room → IUL only if you’re out of tax-advantaged space and need the insurance design.
Frequently asked questions
- Should I get the full employer match before considering an IUL?
- Almost always yes.
- Which one has required minimum distributions?
- Traditional 401(k)s do at 73 or 75. Roth 401(k)s no longer do. IULs don’t.
- Can I fund both at the same time?
- Yes — usually 401(k) first, IUL with dollars that don’t fit elsewhere.
Educational information only. This article is not financial, tax, or legal advice and does not recommend any product.
