Strange Savings Plan

Dave tells Clay to NOT do anything that involves saving money inside a life insurance policy.

QUESTION: Clay’s small business has grown and wants to save money on taxes. His advisor recommended a 419b plan, which is basically life insurance. When it comes time to use it, you can use it for a co-pay or health benefit, you can use it. Dave stops him short to tell him why this sounds bad.

ANSWER: Taxing is a difficult thing. I’ve never heard of a 419b. There are two plans that I know of that involve tax breaks (the 125 cafeteria plan and the health savings account). This sounds like cash value life insurance, and anytime I put a calculator to that, it stinks beyond belief. Don’t do anything that involves saving money inside a life insurance policy.

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