IUL vs. Roth IRA vs. 401(k), on the same dollars.

The Assumptions, Printed in the Open

• Same dollars in. The annual amount is pre-tax earnings. The 401(k) defers tax; the Roth and IUL are funded after tax at today's bracket.
• Contribution limits — 2026 IRS (Notice 2025-67): Roth IRA $7,500/yr, +$1,100 catch-up at 50+; 401(k) deferrals $24,500/yr, +$8,000 at 50+, +$11,250 at ages 60–63. Applied by age each year and held flat across the projection (no inflation indexing). Dollars above a cap are not modeled as invested elsewhere. Roth income eligibility is not checked. Conversions and any backdoor Roth approach require a separate review, including applicable tax and pro-rata rules.
• Contributions land at the start of each year and grow for that full year, in all three buckets, through the retirement age you set.
• 401(k) taxes: the entire ending balance is taxed at your retirement bracket, as ordinary income is when withdrawn.
• IUL crediting is a single assumed average rate. Real policies credit by index performance subject to caps and participation rates, with a 0% floor — the average hides the path.
• IUL charges are modeled, not hidden: a 5% premium expense charge, a $120/yr policy fee, and cost-of-insurance charges on the net amount at risk from a simplified age-banded table that rises as you age.
• Death-benefit expense adjustment. The model uses interpolated age-based multipliers to raise its assumed death benefit when cash value grows. This is only an expense-model approximation. It does not implement the complete statutory table, certify §7702 compliance, or determine an insurer’s actual death benefit or insurance charges.
• MEC status is not calculated. Age and a death-benefit amount do not establish an actual seven-pay premium. Obtain policy-specific funding limits and MEC testing from the insurer. The IUL column shows modeled cash value before access tax; it does not certify favorable loan treatment.
• Employer match is modeled when you add it — as a percentage of your own 401(k) contribution, added on top of your deferral and taxed like the rest of the account at the end. Leave it at zero and no match exists. Actual matches depend on the plan’s formula, limits, and vesting. This model assumes the entered match is immediately vested and does not test the total employer-and-employee contribution limit.
• Investment and plan fees are charged to the market buckets at the rate you set, taken out of the balance each year. The 0.48% default is an adjustable assumption, not a verified current average or a quote for your plan. The IUL's costs are its policy charges, itemized above.
• Down-year mode replaces the market return with −12% every 7th year; the IUL credits 0% those years — its contractual floor.
• Uninvested budget: dollars above a contribution cap are shown as after-tax cash not invested, excluded from the chart and ranking. If modeled IUL cash value is exhausted, future premiums stop and their unused budget is shown separately.
• Model lapse: the IUL stops permanently when the simplified annual charges exhaust cash value. Actual grace periods, coverage provisions and reinstatement rules are not simulated.
• Not modeled: state taxes, future tax-law changes, policy surrender charges, actual loan capacity or loan interest, Roth income eligibility and qualification, and required Roth catch-up treatment for certain higher earners. The 401(k) is modeled entirely as pre-tax.
• Values are not equivalent spending amounts. Roth figures assume qualified withdrawals. The pre-tax 401(k) is reduced by one assumed tax rate. IUL figures are modeled cash value before borrowing, surrender charges, and access taxes. Actual loans may be less than cash value and accrue interest. This is not a sustainable retirement-income model.