401K vs. gold/silver Bullion

It has already been a trial balloon politically. "Someone" has already stated its unfair that those with healthy retirement plans continue to collect large SS benefits while others without retirement plans don't get as much in SS. "Unfair" politically usually means they are planning to do something about it if they have a chance.

With SS, there are only 2 options: Either tax income to infinity while capping benefits like they do with medicare, or limit benefits somehow. I don't think taking away a retirees SS that has no assets and only $800 a month to live on is politically viable, so what other alternatives would there be? To me, its either tax income to infinity or take away SS if you were stupid enough to save for retirement.

Having said that, I am still saving for retirement just in case they choose the first option.

Sorry mods, not trying to be political, just practical when it comes to retirement planning. If you believe its political please delete.

 

Log in or Sign up to hide this ad.

Thanks to both buyingsilvers and medoraman for enlightening this matter. I wasn't aware of it. I should think over about my current retirement diversification.

 

I would take a look at how your 401K investment is being allocated and make some changes. I revisit every 6 months and make changes here and there and it works out.

Just keep it diverse: some in the 401k, some in PM's, some in your guns (watch out for that national gun ban though- just kidding, that's one of the most far out things I've heard all month).

Don't make hasty decisions. Make calm, educated decisions and you'll be good to go.

 

Yes, there is always that possibility lurking in the background. Few people think about it or even understand what you refer to, but this has been discussed in various places. It seems to be a low probability event, but it isn't a zero probability event.

 

It also means the government can raid private retirement funds to pay off SS deficits. I don't pay into SS, but rather a company retirement fund, the National Railroad Retirement, which is all privately funded by the workers with 0% contribution from the government. Yet, in the early 80's it was literally raided to pay SS benefits. I'm having to pay that back even though I wasn't even in the work force at the time, while the government owes nothing. So, this can happen to any retirement plan, including 401K's and IRA's. It's best to diversify and take advantage of every plan you can and contribute as much as you can. I'm maxed out every year on my 401K, as is my wife, and this year we were offered an IRA through work as well, which I take full advantage of. But, I don't see anything wrong with buying some metals as well, just to keep things interesting.
Guy

 

Well from my understanding, the funds aren't being "raided" in the general sense. The govt, in their infinite wisdom, uses the money from these funds and replaces it with IOUs. This normally isn't a problem unless the govt cannot pay back all of the ious, and therefore must raise taxes or lower benefits to keep those funds solvent.

SS is such a scam. between employees and employers, they contribute 12.4% of one's salary per year. And even so, the social security payout is dismal.

If I had the opportunity to opt out, and forfeit all my contributions paid so far, I would do so in a heartbeat. By the time anyone relatively young retires (20s or 30s), the full retirement age will likely be over 70 and the payout much lower than it is today when adjusted forr inflation.

But I do agree that diversification is the key. Social security doesn't even factor into my budgeting or retirement plans. If it's still around once I "hit age" and pays out anything more than a token amount, I'd consider myself lucky.

 

My prediction for SS? Means tested, and possibly even allocated based upon some sex/race/career earning/lifestyle formula. The biggest pot of money left, (even though its IOU's), out there is SS, and if a political party can raid it to benefit their own group, they will have a huge "win" for them.

Nevermind the poor schmucks who actually paid most of the money in, and then were dumb enough to save themselves. It will be another example of the "Grasshopper and the Ant".

I wish I thought differently.

 

Something to consider is that we've had 2 flash crashes in the past week, the one that crippled Knight Capital Management and then yesterday the Spanish Ibex 35 was offline for 5 hours. Do you really think your money is safe in cyberspace where companies don't even know how or why their high frequency algorithms do what they do? I don't. I haven't pulled anything out of my 401K because I just allocate a portion of my paycheck each month, but if I had no other way to buy metal then I would cash it out. My metal is the only retirement I'm counting on. Guns also hold their value very well, but aren't as liquid (ammo sure is though) and you might have to find the right collector to sell them for the price you want. Still, it never hurts to have protection. I wouldn't recommend buying metals without it.

 

Something to consider is that metals are volatile and only a tiny segment of what it's possible to invest in. What if the price of metals crash, what if they're stolen, what if they're seized (SDBs, not likely IMO), what if the govt decides to tax them to the moon, what if your wife or kids swipe it and divorces/leaves you, what if they're blown away in a hurricane, house burns down, etc.

The price of the metals has been pretty stable, even though still on a flat/downward trend since it hit its highs. Silver is almost 50% off the high, which new "investors" that bought into the hype wasn't very pleased about. I've seen more than enough people get burned by the "all-in" approach and was forced to sell some metal at inopportune time because "Life happened". And I also think the threat of home invasion and having my stash get stolen is a bigger threat than my vanguard mutual funds magically disappearing.

 

Just keep in mind that Vanguard funds are derivatives, just like Direxion's, just like every other mutual fund where you are giving your money over to be reinvested however the fund manager sees fit. The derivatives bubble is over $1.7 QUADrillion and growing. There's not enough money to pay off all the debt in existence, even though the money supply is expanding exponentially to pay the bare minimum. Somebody will be left holding the bag at some point, and you can bet those with preferred options will be less likely to be holding it than folks like us. Nothing is a foolproof investment, but what metals give you that nothing else can is the ability to defend it on your own terms.

 

I'd rather take this chance, as you can at least carry an insurance policy on your collection. You won't make back all the hard work and time spent compiling everything, but at least it's something to fall back on if there's a disaster of this kind.

In the case of gov't taxing and seizures, well, not much you can do there, but I'm hoping the chance of that is at the very bottom.

 

I think it's the wrong question.
Don't ponder giving one up for the other.
Do both. Sock money away until it hurts.
Find a way to get the maximum into the 401k AND invest in PMs.
That way you'll be self sufficient in retirement and the question of entitlements is other people's worry.

 

I'm curious if you have a policy because this is something I actually looked into before and discarded as an option.

As I understand it, you will need to pay to have an appraisal done on the value of the items you're keeping in your home, which is what the reimbursement will be based on. If you add to the stack, you'll need to get another appraisal if you want the additional PMs covered.

Also, the cost of the insurance rider isn't really that cheap either. If you're attempting to insure 500k in pms, it will cost you a lot of money yearly. Since this will be your main investment vehicle, I'd assume you have at least a half mil before you retire. Nowadays, ideally you would want maybe 2 mil worth since PMs pay no dividends, and you'd basically be selling your stash gradually to eat in your retirement. If you estimate an insurance cost of .5% (and I'm sure it's more than that), you'll be burning $2,500/year to insure 500k up to $10,000/year to insure your 2 mil.

You'd be relying on evil financial instruments and a promise that you'll be compensated, which kinda goes against the purpose of going all "physical" in the first place?

 

Back to the OP's question.

It seems to me that your issue isn't the 401K but rather the returns you are making on it. While you didn't provide details on what investment options are available, IMO, you need to address your investment choices instead of ending contributions to the plan. The tax advantages of these plans can't be ignored, especially if you live in a state with income taxes. Even if you put your money in a low return fixed interest option, you would do better than taking this money and taking the income tax hit on it.

Bullion buying and all other post tax investments should be made AFTER you have eliminated all your high interest debt and put away some emergency money.

 

For me, the PM's / coins are not meant as a primary vehicle for retirement savings, but more an insurance policy of their own on many levels (including zombie apocalypse ). If things go well, I don't plan on needing them to contribute towards my retirement but be more "fun money" if needed instead. Honestly I'd rather like to pass it all on to my kids so they can continue to enjoy them if they wish as my oldest is starting to get the collecting bug.

I view the insurance on them just as any other maintenance/overhead cost associated with things. Mutual funds and investments in my 401k carry a maintenance fee percentage as overhead. You usually don't see it since it's built into your overall return percentage, but it's there and can be sizable. SDB's carry some sort of fee, be it a monthly, or the overhead of maintaining a certain amount of business with your bank (don't know about you but my mortgage interest easily dwarfs the value of any SDB could ever counter). I'd much rather pay a few grand a year to hopefully mitigate a complete disaster than lose everything in a house disaster (fire, flood, earthquake, etc) or theft.

 

TECHNICALLY a mutual fund is a derivative, but you are using that fact to cloud the story. It is NOT the same as most derivatives, are not traded as a derivative, are legally protected assets from most lawsuits, etc, you have legal protection from the prospectus, and a very LARGE percentage of funds AREN'T invested at the discretion of the fund manager. Index funds aren't allowed to invest in anything but the index, in direct proportion to the index its tracking.

I just think your points about mutual funds are extremely misleading. Now, if we wish to have a conversation about the shortcomings of mutual funds, I can do that, but they are not the points you are trying to make.

I really don't see any "derivative bubble". Remember these are zero sum games. They could be settled tomorrow for zero net cash outlay, it would just be a matter of who had to pay and who got money from all of the relationships. $1.4 quadrillion will NEVER be needed to settle these derivatives.

Let's say all of us here are billionaires. You and I believe the Euro is going opposite directions, so we hedge $1 billion against each other. I have second thoughts so take the opposite contract with Cloud. You change your mind as well, and so does Cloud, so you both take opposite sides as well. Now, we all have zero liability regardless of what happens with the Euro, but technically until expiration there are now $6 billion more derivatizes out there. How much cash will be needed to settle? None.

So, now how do you feel about this "derivative bubble"?

 

Sorry about that, for some reason I thought you were the poster advocating 100% allocation to metals.

That's true about the 401k maintenance fees & mutual fund fees. But it's also true that the stocks contained within normally pay some sort of dividend and hopefully are profitable, which offset the fees. For that reason, I think they're a good store of value, for the "insurance policy" as you call it, and not so much as a profit generating investment.


Another thing about PM insurance: since you have to "declare" your PMs to the insurance company, basically all of their employees and agents will probably be able to pull up your file (if they were so inclined) and see that you have a rider for your PMs stashed at your address and see the appraisal. That was also not something I was comfortable with.

 

Not that simple as someone who has worked on IT side most insurance companies have strong security that require authentication before you can do such a thing heck if you are that paranoid.

*Tin Foil time* You realize when you buy from PMs using credit card that information is shared with all the marketers and also anyone who is handling you packages (usps, fed ex or ups worker) will know that you are buying PMs....

 

^

Well, that was just an additional reason on top of the others I listed. Transactions from smaller purchases here or there doesn't equate with an entire appraised list.

Also, the employees and agents at the company can pull up your file. I have several close friends that work in the industry. Logins and such are there so someone on the outside cannot log in, which they usually cannot even access anyways unless they have the software on the computer or are at a workstation at the company.

 

I wouldn't even go that far. A mutual fund is not a derivative. A fund enables joint ownership over a pool of assets. This is a very different situation from the contracts normally thought of as derivatives where there is no ownership of an underlying asset, but only a bet with a counterparty on the change in value of assets that neither party to the derivative contract needs to own.