Which Path?
Stay in your 401(k), or redirect your own contributions into an IUL now and roll the 401(k) in later.
A few talking points
Three quick questions to talk through. They don't change or limit the comparison below.
Do you have the time — roughly 10 or more years before you'll need this money?
Can you comfortably fund this consistently for the long haul?
Are you healthy enough to qualify for life insurance at a reasonable rate?
The path
Today your own contributions open the IUL while the existing 401(k) keeps growing with the employer match. Drag to choose when the 401(k) rolls into a solo 401(k) and starts funding the IUL — illustrated as an alternative to a Roth conversion.
Rolls about $569,906 into the IUL over 6 years. Rolling before 59½ adds about $63,459 in 10% early-distribution penalties (included in taxes).
Net spendable income (lifetime, after tax)
Stay in 401(k) higher by $1,373,291Stay: about $79,698 first-year 401(k) withdrawal (4%, rising with inflation, at least the RMD). IUL: about $98,997 a year in policy loans, plus withdrawals from any match money left in the 401(k).
Money left to heirs (at 95)
Stay in 401(k) higher by $1,243,535401(k) money left to heirs is shown after an assumed 24% income tax for heirs. The IUL death benefit, net of loans, is generally income-tax free.
Lifetime taxes paid
IUL path lower by $226,069Federal income tax only. IUL path includes the tax on redirected contributions (they lose the 401(k) deduction), tax and any penalties on moving the 401(k) into the policy, and tax on match withdrawals. Policy loans are not taxed and don't make Social Security taxable.
MEC warning
At this rollover age the funding runs into Modified Endowment Contract (MEC) territory. The death benefit has been sized up and the rollover spread out, but a full illustration would be needed to confirm the policy stays a non-MEC.
Living benefits
The IUL path can put money to work while you're still living. The 401(k) path has no built-in equivalent.
Redirect to IUL + rollover
- Chronic illness benefitIf you can't perform 2 of 6 activities of daily living — bathing, dressing, eating, toileting, transferring, continence — or have severe cognitive impairment, part of the death benefit can be paid out while you're living to help cover care.
- Critical illness benefitIf you're diagnosed with a qualifying critical illness — for example a heart attack, stroke, cancer or organ failure (the exact list varies by carrier) — part of the death benefit can be paid out while you're living.
Stay in the 401(k)
Not included — withdrawals are taxable.A 401(k) has no built-in living benefits. To pay for a health crisis you take a withdrawal, which is taxed as ordinary income and, before 59½, can carry a 10% penalty unless an exception applies. It also leaves less for retirement.
What this means: With the IUL, the same dollars can protect you while you're living, not only your family after you're gone.
Living benefits may let you access a portion of the $1,179,154 net death benefit calculated for this comparison. How much is available depends on the carrier, the illness, and the insured's age and health — no payout amount is assumed here.
Living benefits are provided through accelerated death benefit riders. Availability, qualifying conditions, and payout amounts vary by carrier, product, and state. Accessing a living benefit reduces the death benefit and cash value. This illustration is educational only and is not a guarantee of coverage or payment.
Values by age
This educational comparison is a hypothetical illustration, not a recommendation or a product illustration. The 401(k) side uses the same federal tax engine as the 401(k)/IRA calculator (2026 brackets indexed at 2.5% inflation, standard deduction, Social Security taxation under the IRS provisional-income formula, RMDs from age 75 and the 10% early-distribution penalty before 59½); state taxes, IRMAA and NIIT are not modeled. The IUL side is a simplified year-by-year model at a non-guaranteed 6.69% crediting rate, with policy charges calibrated to the supplied Allianz Life Accumulator® illustrations; MEC limits are estimated from those illustrations, and a death-benefit increase at rollover may be treated as a material change that starts a new seven-pay period. Actual premiums, charges, death benefits and MEC limits require a full illustration and underwriting. Policy loans reduce cash value and death benefit and can cause lapse or taxable events; tax-free treatment depends on the policy staying in force and not becoming a MEC. Moving 401(k) money into a life insurance policy is a taxable distribution. Values are not guaranteed; guaranteed values are lower, and actual results may be more or less favorable. The death benefit is generally income-tax free to beneficiaries. Guarantees depend on the issuing insurer's financial strength and claims-paying ability. The Roth-conversion-alternative framing is illustrative only and is not tax or legal advice; consult a qualified tax professional before moving retirement money.