Comparing Employer Group Term Life, 401(k)/403(b), IRAs, Roth IRAs, and 7702IUL Policies: What You Need to Know

Building a strong financial plan requires understanding the tools available to you — and choosing the right mix. Most people are familiar with workplace retirement plans and IRAs, but fewer understand how life insurance and advanced strategies like 7702 IUL policies fit into the bigger picture.

In this article, we break down the key differences, benefits, and limitations of Employer Group Term Life Insurance, 401(k)/403(b) plans, IRAs, Roth IRAs, and 7702-compliant Indexed Universal Life (IUL) policies so you can make informed decisions for your financial future.

1. Employer Group Term Life Insurance
   Employer-provided group term life insurance is usually the first type of life insurance people get — but it’s also the most misunderstood.
   How It Works
   ● Coverage is tied to your employment.
   ● Typically offers 1–3× your salary at little or no cost.
   ● Additional coverage may be purchased, often at higher rates.
   Pros
   ● Easy to enroll
   ● Low cost or free basic coverage
   ● No medical exam required for standard amounts
   Cons
   ● Not portable — you lose coverage when you change jobs.
   ● Premiums increase with age.
   ● Coverage amounts are often insufficient for families.
   ● No cash value or savings component.
   Best For
   Basic protection while employed, but not a full financial strategy.
2. 401(k) and 403(b) Retirement Plans
   These employer-sponsored plans are among the most common retirement savings vehicles.
   How They Work
   ● Employees can contribute pre-tax (traditional) or after-tax (Roth, if offered).
   ● Employer match may be available (primarily in 401(k)s).
   ● Contributions grow tax-deferred.
   Contribution Limits (2025 estimates)
   ● Employee contribution: $23,000
   ● Catch-up (age 50+): $7,500
   Pros
   ● Tax deferral or Roth tax-free growth
   ● Employer match = “free money”
   ● Automated payroll contributions
   ● High contribution limits
   Cons
   ● Subject to market risk
   ● Early withdrawal penalties (before age 59½)
   ● Required Minimum Distributions (RMDs) at age 73 (traditional plans)
   ● Limited investment options
   Best For
   Long-term retirement savings with tax advantages and employer support.
3. Traditional IRAs
   An IRA (Individual Retirement Account) is a personal retirement plan with tax benefits.
   How It Works
   ● Contributions may be tax-deductible.
   ● Growth is tax-deferred until withdrawal.
   Limits
   ● $7,000 annual contribution (under 50)
   ● $8,000 (50+)
   ● Deductibility may phase out based on income and workplace plan participation.
   Pros
   ● Tax-deferred growth
   ● Wide investment options
   ● Potential tax deduction
   Cons
   ● Low contribution limits
   ● Income restrictions for deductions
   ● 10% penalty before age 59½
   ● RMDs at 73
   Best For
   Middle-income savers needing tax deductions and flexible investment options.
4. Roth IRAs
   Roth IRAs flip the traditional IRA tax model.
   How They Work
   ● Contributions are made after tax.
   ● Growth and withdrawals are 100% tax-free when rules are followed.
   Limits
   Same contribution limits as a traditional IRA — but with income restrictions.
   Pros
   ● Tax-free growth
   ● No RMDs for the account owner
   ● Flexible early withdrawal rules (contributions accessible anytime)
   ● Excellent for long-term wealth building
   Cons
   ● Income limits may prevent contributions
   ● Low contribution limits
   ● Not ideal for high earners without backdoor strategies
   Best For
   Tax-free growth and long-term retirement planning, especially for younger savers.
5. 7702-Compliant Indexed Universal Life
   (IUL) Policies
   Often misunderstood, IULs are life insurance policies that also build tax-advantaged cash value when funded properly under IRC Section 7702.
   How They Work
   ● Part of the premium pays for insurance.
   ● The rest grows in a cash value account linked to a market index.
   ● Growth has an upside cap but a 0% downside floor.
   Key Features
   ● Tax-deferred growth
   ● Tax-free access via policy loans
   ● No contribution limits
   ● No RMDs
   ● Death benefit protection
   ● Potential living benefits (chronic/critical illness riders)
   Pros
   ● Tax-free retirement income
   ● Market upside with downside protection
   ● No government participation limits
   ● Asset protection in many states
   ● Lifetime coverage and legacy benefits
   ● Not tied to employment
   ● Can function as a “private family bank”
   Cons
   ● More complex than investment accounts
   ● Must be funded properly to avoid becoming a MEC
   ● Requires long-term commitment
   ● Policy charges must be managed (solved with proper design)
   Best For
   High earners, business owners, families wanting tax-free income, and anyone needing both protection and accumulation.