Walter L. Sheffield III, JD, CFP®

Your first question to HR or your benefits line should be whether your plan has a brokerage window feature. If so, you could invest in individual stocks without moving out of the plan. If the answer is no, then the second question should be whether the plan permits in-service withdrawals (and if you are over 59 1/2) so that you could move money out to a rollover IRA and invest in individual stocks. If these are not available, you could make deductible contributions to an IRA if you are not an "active participant" in the 401(k) plan. Be careful with this, because you are an active participant if you are receiving employer contributions of any kind, even though there is no match. Employer contributions include profit sharing, safe-harbor, or even allocation to you of forfeitures from non-vested terminated employees. If none of these work, you might still be able to create a Roth IRA and do what you want, as long as your income is below the minimums for doing that.

First, try to identify your goals. Are they reasonable and attainable? Next, identify and prioritize the obstacles and risks to your goals. For example, income tax was an obstacle, in a sense, that you might have successfully dealt with by deferral in the past. Divorce, though, was a risk that worked against income tax deferral in that your tax deferred assets were subject to ERISA's spousal protections. Carrying this example forward, you might need to evaluate these same two factors and try to prioritize them. If another marriage and then the "risk" of divorce were the greater risk, you might weight more of your assets to separate and sequestered title, for example, using a trust, rather than income tax deferral. If both were equal, you might consider a pre-nupt or some other way to protect against both risks prior to another marriage. These are just examples, possibly seemingly unlikely. There are many other risks to consider. The point is to go through this sort of process before rushing into a product or strategy decision.

Life insurance should be purchased when the death benefit is needed. The cash value should not be considered an investment. Dividends or other returns on "investment" within the policy should be considered as part of the policy's ability to remain in force and to provide a death benefit late in life. The fact that needs might change and that the cash value might be needed more than the death benefit at some future date might be a nice positive factor, but it should not be the reason for buying a life insurance policy.