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Chapter 8. Using a 401(k) to Achieve You... > Buying Insurance - Pg. 84

Using a 401(k) to Achieve Your Other Financial Goals 84 Finally, it will probably take two to six weeks or more for the plan administrator to get you a check. Your emergency might not wait that long! It's better to look for other sources for emergency cash than your 401(k) plan. Better yet, set up an emergency savings account outside your 401(k) plan so that you can get at it quickly and without penalty. Buying Insurance This one is easy: Don't, repeat, don't use your 401(k) money to buy life insurance. Some 401(k) plans allow you to buy whole life, variable life, or flexible life insurance with your 401(k) contributions. "Not prudent," as former President George Bush would say. First of all, life insurance is not an investment. Second, life insurance--even policies that offer an investment component, such as variable life insurance--are already tax sheltered. If your cash value grows inside a life insurance policy, you don't pay taxes on it. If you die, your beneficiary receives the settlement and won't owe income taxes on it. Wrapping up insurance inside a 401(k) plan makes little sense, especially when the expense charges are considerably more than similar investments. Warning! Life insurance is a financial product. Its primary benefit is to protect your dependents against the immediate