I have been considering different ways to generate some returns on my money, rather than just having it sit in a savings account at the bank.

My understanding is that the obvious first step is to begin adding to a retirement-type account, using the matched amount from one's employer. However, I've been getting different advice from different people.

It seems very standard for people to recommend either a 401(k) or a Roth IRA as a long-term way to increase wealth.

However, I have had others tell me that a better alternative is to use "variable universal life insurance", which provides both a) a life insurance policy and b) a way to grow your money similar to mutual funds, but with very similar tax benefits to a Roth IRA (i.e., you don't pay taxes when you withdraw money from such an account).

My question is, essentially, should I use a VUL instead of a 401(k) or a Roth IRA? What are the risks or benefits of either method of saving money?

  • 4
    Have you already read the other discussions of universal life insurance here? (Everything I've heard suggests that entangling investments and insurance will keep you from getting the best results from either.)
    – keshlam
    Jul 25, 2014 at 21:48
  • I've looked at questions regarding "indexed universal life" and "whole life insurance" (the first few results when searching for "variable universal life"), but it's unclear to me if these types of accounts are the same as a VUL.
    – CmdrMoozy
    Jul 25, 2014 at 21:58

3 Answers 3


Using any form of insurance as a way to save/invest is probably your very last option and is only practical for an extremely small minority of (rich) people who have maxed out just about every other option for saving money for retirement.

However, this type of scheme is almost always at the top of the list that commissioned brokers will suggest, even in situations where it is almost criminally negligent to do so. The reason for that is that the commission for signing you up can be very high. If the company wants to you to sign up that badly, I'm sure you can guess what the costs on such a thing tend to be.

Simply put, buy insurance to mitigate financial risk not as a way to invest.


Any "universal life" program is a matter of bundling two products which really aren't in any way related to each other into a single product.

The advantage is that you are forced to save something every time you make a premium payment. (The same advantage some folks get from mortgages -- they're forced to build equity -- or from "christmas clubs" which sequester a fixed amount on a regular basis until the end of the year.)

The disadvantage is that you are forced to accept their decisions on how to invest and how much of the returns on that investment go to you rather than to them.

If you don't need the former -- if you can save without being forced to -- this is probably not a net good deal.


First, you must consider that life insurance is life insurance and is not an investment vehicle, period.

Life insurance is needed because of the need to mitigate the risk of income loss due to the death of the income earner. And/or you need to transfer wealth to your family without federal income taxation (for state, check your local laws). Those are the two major needs among others.

Remember that a portion of the premium will be paying for the cost of insurance. You have to justify if there is a NEED for that cost.

Once the need of insurance has been established, then you can then take advantage of the various benefits that permanent life insurance have. It can be a very powerful cash accumulation vehicle if setup properly for the right needs.

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