The "Bank on Yourself" Concept

It's a stupid ploy created by insurance salesmen to sell whole life policies.

It's been discussed here as nauseum and has always been shown to be inefficient.

It is not a terribly efficient way to build a nest egg. That said, for someone who needs lots of handholding there are worse strategies out there. Like daytrading options based on the recommendations of some random guy online.

But for someone in that position a stupid easy but more effective plan is to just make sure you set aside money from every paycheck to buy into a target year retirement fund.

ETA: The really important thing with *any* savings plan is to make regular contributions to your nest egg. The "Bank on Yourself" idea does do that at least, but returns on investment are lacking. You can do better.

There are some reasons why using insurance as a retirement vehicle can help, for example, if you think you might need to shelter assets from things like bankruptcy, alimony, need-based scholarships for your kids, that sort of thing. But it still takes lots of careful consideration given the lack of investment performance.

Most people can do this with a 401k for little or no fees. Just the interest charges which go back into the 401k.

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Edited. I think I misunderstood the previous post. A major difference between borrowing from a 401k and life insurance is that when the funds are withdrawn from the 401k they are no longer participating, or earning interest. That can be a big advantage to a life insurance policy.

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It is my understanding that when you borrow from a life insurance policy you are then charged interest on the amount borrowed, but the interest rate is about the same as the investment return earned by the cash portion of the policy, so it is really no different from borrowing from a 401K in terms of missed investment earnings.