401(k) plans are designed to encourage saving by allowing pre-tax contributions, which reduces your current taxable income. The investments grow tax-deferred, so you don’t pay taxes on the earnings until you withdraw. Employers often provide matching contributions, which helps grow the plan faster. The part that isn’t true for a standard 401(k) is that post-retirement distributions are tax-free. In a traditional 401(k), withdrawals are taxed as ordinary income when you take them out. Tax-free distributions would only apply to a Roth option, not to the traditional 401(k).

Straight Whole Life is a form of Whole Life policy that uses continuous, level premiums paid for the insured’s entire life. This setup keeps the policy in force for life and builds cash value over time, which is why it’s classified as Ordinary life. It’s different from term insurance, which covers a set period and typically has no cash value; from endowment policies, which mature and pay out at a specified age if still in force; and from universal life, which features flexible premiums and a cash value that can vary with interest credits. So the best fit for Straight Whole Life is Ordinary life.

Policy loans are not normally taxed as income while the policy remains in force. A loan against the cash value is simply borrowing your own money from the insurer, so no taxable event occurs at the time you take the loan. The policy can keep growing tax-deferred, and you owe the loan plus interest to the insurer. Tax consequences arise if the policy lapses or is surrendered with an outstanding loan. In that case, the loan is treated as a distribution to the extent the policy’s gains (earnings) exceed the cost basis. Those gains are taxed as ordinary income to the insured. If the policy is a Modified Endowment Contract (MEC), access to cash value through loans or withdrawals is taxed as a distribution of earnings, meaning any amount withdrawn or loaned is taxed to the extent of the policy’s earnings, regardless of the basis.

Absolute assignment means you transfer ownership rights in the policy to someone else. The person who receives the assignment becomes the new owner and gains full control over the policy—this includes things like paying premiums, borrowing against the cash value, surrendering the policy, and naming or changing the beneficiary if the owner chooses. The original owner no longer has any ownership powers. This is different from collateral assignment, which only uses the policy as security for a loan and does not transfer ownership. It’s also not about changing who gets the benefits under the policy, which is a change of the beneficiary designation. And it isn’t simply transferring nothing at all.