The main difference between a max-funded IUL and a 401k lies in their primary purpose, contribution limits, access to funds, and potential benefits. A max-funded IUL involves paying the maximum allowable premium to accelerate cash value growth within a life insurance policy, offering both a death benefit and the potential for tax-deferred retirement income through policy loans or withdrawals. In contrast, a 401k is a dedicated retirement savings plan with annual contribution limits set by the IRS, providing tax advantages on contributions and growth. While both offer tax- deferred growth, max-funded IULs provide greater flexibility in contributions and earlier access to accumulated cash value. However, this may involve potential tax implications and impact the death benefit. 401k contributions are limited, but withdrawals are generally tax-free after retirement.
Additionally, 401ks may benefit from employer matching contributions, a feature not available with IULs. Ultimately, the choice depends on individual financial goals and risk tolerance. A max-funded IUL may appeal to those seeking life insurance coverage combined with greater control over cash value accumulation and access, while a 401k offers a straightforward retirement savings vehicle with potential employer-matching benefits.