401K vs. gold/silver Bullion

I'm currently 37 years old and I've been putting about $250 per month into my 401K. Unfortunately it seems to evaporate nearly as fast as I put it in there. I'm beginning to wonder if I should tell my HR department to stop allocating money to that for the time being, and instead take that $250 per month and invest in gold/silver. I hear the investors saying you should invest 20% in precious metals. Well, as it stands right now between my bullion collection and my 401K I have only 5% precious metals. So I'm sort of thinking if I stopped my contributions to my 401K for a year or so, I could get my PMs up to that 20% a lot faster.

The disadvantage being that my company does match my 401K contributions, but the match varies anywhere from nothing to 100% depending on their profitability for the year. Well, they've done so much expansion this year I don't think there's going to be any profits, so this would probably be a good year to execute my idea if I were going to.

Any advice on this?

The other thing I invest in are antique guns (mostly world war II) and I could possibly buy more of that as well.

 

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It depends on what investment options you have within your 401k. It's very strange that the money you've been putting in there is "evaporating" over the past three years since nearly every investment class is up.

Given the growing possibility of a national gun ban at some point, it might not be wise to consider your collection to be an investment. It's just something to be enjoyed. But at some point you may have to surrender the collection for nominal compensation.

 

Company match or not, you still get the benefit of putting taxable income in a tax-deferred account. Is your 401k self-directed? If yes, you can invest in PM's directly from within the 401k. If not, then you should probably spend some time getting a better understanding of what your company invest your 401k money in..."evaporation" is not good.

 

Keep diverse. Keep the 401k, but take advantage of any help your company, or the 401k company, may have as far as advice or guidance on which funds to properly allocate your money to (most have a free number to call and talk). Talk to an independant financial advisor if you need. Buddy of mind did that because he felt he wasn't getting good enough returnsand within the next year his returns jumped 20%.

Do not put all your eggs in one basket, and do not do it hastily.

In my 401k I concentrate on good dividend paying stocks in my 401k, only a little portion of the whole is aggressive stocks.

I've been building up silver and gold bullion for my views on their "investment" value. I like to collect the coins as well, so I get the other side of building the collection, not just the base monetary aspect. I adhere to buy more often, but in smaller amounts, to cost average the highs and the lows. Trying to time anything (market, PM prices, etc) will just lead to heartbreak.

 

First, 401k is tax advantaged. Second is instant profit from company match. AT LEAST always capture the company match. If you wish, you can always go for less risky investments, but long term history tells us that this is the wisest course.

Any money left over can of course be put into PM as a percentage of your total portfolio. However, make sure you pay down "bad debt" first, things like credit cards, car loans, etc.

 

I would keep your 401k and use "extra savings" for your metals.

One huge advantage that a 401k has that other investment types dont, even IRAs, even metals... is that it is very difficult to take someone's 401k away from them. It is generally shielded from bankruptcy and lawsuits.


Back during the financial crisis, people were pulling money from their 401ks to prevent themselves from defaulting and going bankrupt a little longer, which was a bad move IMO. They filed bankruptcy anyways, and were that much poorer afterwards.

 

BuyingSilvers

May be off topic but from what i understand can't the government technically take hold of 401k policies (if fiscal debt issue boils over) and give you an IOU to be paid when you retire.

 

Yup. It's not only difficult, it's almost near impossible.

 

If your work isn't doing any type of matching of the 401k, yank it out, roll it over into your own IRA of your choice at whatever bank of your choice. Then you have the option to put whatever amount you want each year by doing it monthly or one lump sum at the beginning if you want (most IRAs have a max amount yearly contribution).

But like the others have said, keep the 401k or roll it into something better along with adding to your bullion investment.

 

By any means - if your company matches your contribution - even though it varies from 0 to 100% - I would not give up my 401k. Try to calculate the average matching contribution for the last 5 years and take that as an estimated matching contribution from your company.

Read more: http://www.cointalk.com/t210847-2/#ixzz22nXF9VEs. That's my strategy. Just keep in mind: do NOT put everything into a single basket!

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ALL financial assets, even cash under your bed has their advantages and disadvantages.

The topic of the govt. taking control of the accounts has been around for a while now, at least 20 years. I personally do not put much stock in it. And even if they do to use in tandem with social security, the assets in it is still your money (to be doled out in a similar fashion to social security).

I find the risk of lawsuit/bankruptcy during one's lifetime to be a bigger threat than government potentially controlling a portion of my assets. But I do believe the key is diversification, and that one is better off with the 5%- 10% or whatever contribution into the account than invested elsewhere.

 

I would like to add some information to my original question that I think maybe isn't being well understood.

I have no intention of actually withdrawing my 401K. In fact, I'm not even allowed to do that if I wanted to. I was just considering the possibility that for the remainder of this year I would stop contributing any new funds towards it and instead use that money to buy more gold and silver. Then when next fiscal year comes back around, start contributing to the 401K again. Again, part of my motivation is that I don't expect to have much of any matching this year.

 

Its actually 2 things. One, the government audits 401k plans and have to have separate fiduciaries hold the money and sign off the employer does not have control of it. I sign our firm's 5500 every year declaring this. Secondly, there is insurance against malfeasance from an industry trade group.

401k's are different than defined benefit plans, which has direct insurance.

 

Chris can correct me on this, but I don't remember anything prohibiting multiple IRAs as long as the total limit per year is observed. If your current one is not at your yearly limit, you could start another IRA which allows investments in PM to supplement your employer sponsored one, Do keep matching any free employer contributions, but if it is zero, there is no reason not to put your years contribution into the IRA with the PM account, or some in both.

 

Work would be 401(k), but you are correct Jim that as long as your yearly maximum deferral limit was not hit, you could also fund an IRA. Tax deductiblility would probably not be allowed on both, but in that case I would simply make the IRA a Roth where its after tax money invested in, and tax free withdrawals. If a IRA, then certain numismatic and PM investments are allowed, such as buying ASE and AGE, (though a custodian has to hold them, not you), and many PM investments are allowed.

 

correct me if I am wrong - maximum contribution for 401k or 401a is 17,000 (not including matching contibution from your workplace) and maximum IRA (either only traditional IRA, or only Roth IRA, or combined total of traditional IRA and Roth IRA) is 5000. So, you could contribute to your retirement up to 22,000 $ a year.

If you are expecting a higher tax bracket in the future - put most of your retirement as Roth IRA or Roth $01a/403b.
At least that's what I do: IRA 100% Roth, but for 401a/403b, I use a combination between pretax and Roth 401a/403b.

 

Ignoring the post 50 year old "catch up" those are the limits, but there is a ton of talk of making them consolidated so I just plan that way.

The discussion of pre versus post tax, (tax free or Roth), gets to be convoluted, and really breaks down on individual assumptions. Generically a pre-40 age does better Roth if they can afford the contributions, and post 40 better with tax free contributions. However, that simplistic assumption ignores types of investments, etc. It really is an individual effort to decide since the devil is always in the details.

Personally, I am not fully funding mine since I can't, I am precluded at work by non-discrimination rules to a lower 401(k) amount. Its ok, I use it as an excuse of moving a little offshore since I am not convinced retirement account balances won't be used to lower SS benefits in the future. Best to have both some money in easily portable PM as well as bank accounts not under the Feds thumb. Not being paranoid just prudent in my view.

 

401(k) Max contribution amount from Wiki

 

Thanks! I told you I am still learning. Yes I agree with what you said - I diverse everything into IRA, 401a/403b, and of course PM - and coins! Except that I don't have much cash in bank account - because as soon as I have some, I spend it on coins ;-)

Btw, could you elaborate a bit more on: "I am not convinced retirement account balances won't be used to lower SS benefits in the future" - do you mean that the Government would possibly be using our retirement account balance to lower our SS benefit? Thanks!

 

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It means there's talk about the government looking at your iras, 401k, investment accounts, etc. and using your balances to determine how much social security you should get. Basically a "means" test. If you can afford to get a lower SS benefit, they will lower it, regardless of how much you have contributed over your lifetime. If you have little retirement assets, you get a boost, regardless of how little you worked or how foolishly you spent your money.

There was talk and news articles about this recently.