The 702(j) is not a retirement plan, though many financial agents attempt to market it as such. Instead, it's a whole life insurance policy with cash value. This should not be considered an alternative to a 401(k) or IRA for the purposes of living comfortably in retirement.
This account is a life insurance policy - not an investment account. This whole life (also called permanent) insurance policy features monthly payments that pay the life insurance policy; any portion paid above the monthly required amount for the policy becomes the cash value of the policy. Payments in their entirety do not make up the sum total of the cash value of the policy since fees and commissions are routinely subtracted from the payments. The cash value of the policy can be withdrawn or borrowed against, but that reduces the funds available to beneficiaries upon your death.
Sold as an Investment Policy
Some insurance representatives try to present 702(j) policies as investment accounts to customers wanting to save for retirement. These are generally high-commission accounts for the salespeople and they try to capitalize upon the name "702(j)" as though it's a close association to a 401(k). In fact, the 702(j) gets its name from the U.S. Internal Revenue Code 7702, which defines life insurance policies and the tax rules for them.
Financial experts like Dave Ramsey advise against buying life insurance policies with cash value mainly because these policies are so much more expensive than term life insurance policies. Monthly, a term life policy will cost much less than a whole life policy. If you're looking strictly for insurance and aren't concerned with the policy having a cash value before your death, a 702(j) doesn't make much sense as an insurance policy.
When It's a Viable Option
A 702(j) can make sense for a select group of people: those who have maxed out their 401(k) and IRA and are searching for a place to put money where it will grow tax-free. The 702(j) shouldn't be used as a replacement for retirement accounts but should instead be considered a life insurance policy that can be borrowed against if needs be. Note that failure to repay a loan secured by a 702(j) policy can result in additional tax penalties or the forfeiture of the cash value of the policy. A 702(j) might make sense for a wealthy taxpayer who needs somewhere to stash cash that will not affect eligibility for certain aspects of Medicare and does not count as income when considering what portion of Social Security benefits are taxable.
702(j) Scam vs. Policy
The 702(j) isn't, at its core, designed to be a scam, yet some people consider it a scam because of how it's marketed. When salespeople try to present the 702(j) as anything other than a life insurance policy, it's not necessarily credible. While there are indeed 702(j) policies that exist that are presented plainly and don't feature exorbitant fees, there are also 702(j) policies that are presented as an investment opportunity and feature a shocking number of fees (solely to the benefit of the salesperson). If you decide, after discussing your options with your financial advisor, that a 702(j) is a good option for you, understand fully what the 702(j) is and what it is not before signing on the dotted line.