What Is a 7702 Retirement Plan? | Ask A Fool 1/24/14 | The Motley Fool | Summary and Q&A

TL;DR

A 7702 plan is not an actual retirement plan, but a type of insurance policy, with different tax benefits and expenses compared to a traditional 401k.

Key Insights

• 🌱 A 7702 plan is not an actual retirement plan but an insurance policy marketed with the term.
• 🌱 Contributions to a 7702 plan do not offer tax deductions, unlike a 401k.
• ✋ Expenses within a 7702 plan are generally higher compared to a 401k.
• 🌱 Growth potential of a 7702 plan depends on access to funds, such as loans or variable annuities.
• 🌱 Safety within a 7702 plan depends on the guarantees offered by the insurance company.
• 💼 A 401k, especially with an employer match, is a better option for retirement savings in most cases.
• 🍉 Term life insurance is a recommended insurance option for individuals with dependents.

Transcript

hello everyone I'm Robert brokamp the senior adviser for the mle fools ruly retirement service here we are with another episode of ask a fool this one comes from Michael he says what are your thoughts on a 772 retirement plan we are in negotiations with an agent about a 7702 plan that is alleged to be better than an IRA or 401K in terms of safety a... Read More

Questions & Answers

Q: What is a 7702 plan and how does it differ from a 401k?

A 7702 plan is not an actual plan, but an insurance policy. Contributions to a 7702 plan do not have tax deductions, unlike a 401k. Additionally, the expenses within a 7702 plan are usually higher.

Q: Are the growth potential and safety of a 7702 plan comparable to a 401k?

The growth potential of a 7702 plan depends on how you access the money, such as through loans or variable annuities. However, expenses within the plan are typically higher. As for safety, it depends on the insurance company's guarantees, but generally, a 401k may offer more tax benefits.

Q: Should I consider a 7702 plan or a 401k for retirement savings?

It is generally recommended to go with a 401k, especially if you have one available through your workplace, and particularly if there is an employer match. The tax benefits and potentially lower expenses make it a better option for most individuals.

Q: What type of insurance should I consider alongside retirement savings?

Term life insurance is a consideration if you have dependents. Other types like disability or long-term care insurance can also be considered depending on your situation. However, the 7702 plan is not typically recommended for retirement savings.

Summary & Key Takeaways

• The 7702 plan is not a real retirement plan, but rather a marketing term created by the insurance industry.

• Unlike a 401k, contributions to a 7702 plan do not offer a tax deduction.

• Both plans have potential for growth, but expenses within a 7702 plan are generally higher.