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Hey fools, a new fool here. I have reviewed the previous threads regarding funding a 401K vs. a variable life policy and I think I know the answer to my question, but I want to be sure. Here's my situaution:

I am 38, my wife is 33. We are both contributing to our 401Ks at 6% so that we get the employer match (50% up to 6%). We are finally able to start increasing our retirement savings. A former colleague who is now a CFP with Axa/Equitable is pushing their variable life policy instead of more 401k investment. I should also mention the we are very underinsured. Our incomes have increases a good bit lately and we just had a baby, and we never worried much about insurance before. We get 2x annual salary from employer, but I would like to add about 500k on each of us.

After reading up on things here and other places, I am thinking we need to concentrate on the 401k until we max out our ability to contribute, even though we get no more employer contribution dollars. And that we should just purchase term for our insurance needs. (BTW, we are at the income limit for a Roth IRA so we can't do that).

The Axa guys are stressing the tax-free distribution of their variable life after we retire. But my thinking is this: if I can contribute BEFORE TAX dollars to my 401k instead of AFTER TAX dollars to a variable life policy, wouldn't it grow MUCH faster so that by the time I need to start withdrawing the money, the much greater accumulation would MORE than make up for the fact that I must pay ordinary income tax on it? I mean, assuming that I am in a 28% tax situation, if I have $100 to invest monthly in my 401k, that means I would have $72 to invest in the variable life policy. Wouldn't my 401k grow so much faster that I would be better off doing that and then paying taxes on it when I take it out?

In other words, is it ALWAYS better to put more money into my 401k (if I can) that take out one of these variable life policies (assuming the rate of return of each is comparable)? It sounds like a variable life policy might be a good option IF and WHEN we exhaust our other tax-free options and we still have more we can invest. Am I right in thinking this?

Sorry for my very basic question but I just don't want to make a mistake that could end up costing my tens of thousands of dollars down the road. Thanks,

Dave in sunny Florida
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