A viewer named Karen was putting the full $22,500 into her 401(k) each year. That was the contribution limit when she asked, and the limit has gone up since. Her question was whether she should stop and send that money to an IUL or whole life policy for five years, because she figured taxes would make the 401(k) cost her more in the long run.

I took her question on camera in an episode about stopping a 401(k) to fund a cash value policy. My answer was that I wouldn't set up a side-by-side contest, because the two accounts do different jobs.

A 401(k) gets you a tax deduction now, a possible employer match, and exposure to the stock market. Here's the bracket math. At the 24% bracket, a $22,500 contribution cuts your tax bill by about $5,400. That means the contribution costs you about $17,100 in take-home pay, not the full $22,500. If your employer matches, that's free money on top. You can reach the money before age 59 and a half only by paying a 10% penalty plus income tax, and withdrawals in retirement are taxed at whatever your rate is then. That rate could be lower than 24%, or it could not be.

A cash value policy is funded with after-tax dollars. What you get is tax-deferred growth, a death benefit, and money you can borrow against without a penalty. A policy loan reduces the cash value and the death benefit until you pay it back. Insurance charges and commissions come out of the policy too, so the early years grow slowly.

Every place you put money has a cost. A mutual fund has fees, a rental has property taxes and repairs, and a policy has insurance charges. So asking which one costs more is the wrong place to start. Ask how much each job needs. The first job comes before either account: if all your savings are locked in a 401(k), you have nothing to cover a layoff or a roof repair without paying a penalty. Build the emergency money first, using the sizing in how big your emergency fund should be.

After that, the split is personal. I ask people for their sleep number, which means the mix that lets them sleep at night. Someone with everything in one volatile investment probably doesn't sleep well, and neither does someone with no money they can reach. A common starting point is to fund the 401(k) up to the match and then divide what's left. The tax side of that choice is laid out in Roth or traditional 401(k).

I'm a licensed insurance broker, not a CPA, so run your own bracket past a tax professional. Before you change a single contribution, look at your last pay stub and find out whether your employer's match is still being captured in full.