Has anyone ever used 401k money to purchase PMs?

The gold promoters have popped back up on radio and TV again. "Convert your IRA to gold."

Sad thing is some people will fall over themselves to do it.

 

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I also like the Roth, especially for distribution to beneficiaries. Both of us have had it for more than 5 years, so the possibilities are enhanced.

 

It's a great TDA especially if your tax bracket is the same (or higher) in retirement and you can do a conversion with taxes paid by non-TDA sources.

 

Don't worry. After converting my IRA to gold...er... paper that says I have some - somewhere...? I started adding money back to it through my new income stream - a reverse mortgage...

In all seriousness, there are lots of investment and revenue stream vehicles. An increasing number of them seem to be aimed at taking a larger and larger cut of "YOUR" pie, and maybe not giving you the best bang for the buck.

The first thing everyone should be doing these days is learning what the investments and revenue streams cost to obtain and maintain.

They don't do it for charity... They do it for a slice of your pie!

 

Taking out a 401(k) loan for anything other than an emergency is probably a bad idea. Using the money to buy PMs is definitely a bad idea. If you want to hold gold in a retirement account, open an IRA and do it that way.

 

People have to be careful. The same people who spend weeks or months researching a microwave oven or a new HDTV will move tens of thousands or hundreds of thousands of dollars on a whim or at the behest of a scamster. I've seen it all.

Heck, I even remember my father asking me about "wireless cable in South America" in the mid-1990's !!

 

Howdy,

Generally, you don't want to borrow from your 401(k) although there are exceptions such the adoption of a child as you mentioned. Yes, you pay interest to yourself, but you lose the compounding of your larger balance AND, should you lose your job with an outstanding loan, you MUST pay it back, ASAP or be taxed and penalized on the outstanding loan amount. (pauses to shudder).

Also, when you're employed and contributing to the 401(k) via work, you are limited to the choices they offer. Your choices are not nearly as bad as I have seen. First, check with your employer/administrator to see if they offer a 'brokerage' option. If not, lobby for one. Many of the better plans offer a brokerage option for a modest fee. My civil service system 401(k) and 457 both offered the option for $50 per year. I was able to trade online. This would STILL not permit you to purchase physical bullion but you could get very close. I'll talk about investment choices in a minute.

With regard to your 401(k), you absolutely must match and reap any employer match that you're offered. That is Rule 1. Rule 2, is additional 'retirement monies' available to invest should go to a Roth IRA until you reach its annual limits ($5K - $6.5K depending upon age). Monies beyond this go into taxable accounts.

Note, that for folks that have legacy 401's with previous employers, I would highly recommend transferring them to a Rollover IRA account. Over time, you can consolidate them in account. I also would highly recommend moving it to a full service No Load mutual fund family such as Price, Fidelity or Vanguard. You can buy their funds or via their brokerages services individual stocks. It all makes life easier.

Now, when you are able to buy securities, investing in precious metals becomes a lot of fun. There are mutual funds that almost exclusively invest in gold and silver mining stocks. Indeed, most pm mutual funds ONLY invest in mining stocks. For bullion, you can invest in ETFs such as GLD and SLV, but YOUR GAINS ARE TAXED AT 28% because the 'blue meanies' consider bullion to be a collectible. Your gains on a mutual fund are taxed at 15% (long term). An exception for the cute is Central Fund of Canada CEF which is a closed end fund investing in gold and silver bullion at ~55/45, respectively. And, at this point in time, it is being taxed at 15%. What this means is that within your 401, or IRA or whatever tax deferred or exempt account, you keep your bullion ETF's. Never, ever put a bullion ETF in a taxable account.

With individual stocks, you can get crazy like me. There are large cap and small cap miners in both gold and silver. For me, I've always found the maximum leverage with be with junior silver miners. However, this is nose bleed stuff, and not recommended for the faint at heart. Again, I particularly like to play with these in an tax exempt or deferred account. Makes life easier.

Now all this said, I still prefer that folks keep their 'bullion' stash in the form of physical bullion. By stash, I'm referring to what I consider to be a core holding of 5-7% of precious metals within everyone's wealth portfolio. This is your security blanket, if will. My grandkids have stuffed animals they call their bed buddies. Well, my stash is my bed buddy. I like hands on possession. Too many ways to do it safely - safe, safe deposit box, jewelry, etc. Cripes, a tube of 20 AGE's is about 2" tall and the size of a quarter and is worth ~$25,000 and you can hide it in the oatmeal box.

BTW, right now I have beginning momentum investing plays in the juniors riding SLV, EXK, AG, GPL, and ASM. They've been running great, but we'll see about the open and how they drop. I might be pulling the plug.

Good luck,

peace,

rono

 

FOr thos that can, the only realistic option is to convert your personal IRA into a self directed IRA. Of course you will have to have the PM's stored somewhere and pay a fee for that on top of other fees.

IMHO, unless you are willing to create a Self Directed IRA with Check Writing Ability you will not be able to creatively find a way to actually be in direct control of the PMs. Your risk is the government takes everything from you since the IRS is allowed to penalize before proving guilt.

 

@ OPs question.........What? You think I'm nuts? Never put all your eggs in one basket. Especially as basket most volatile......

 

Diversification. Period.

 

And asset allocation !!!!

 

I've never been a fan of "storing" metals with any outfit. I'm sure there are plenty of good ones out there, but how many times does that story have to play out where folks have lines on a spreadsheet and no actual bullion.

There's one place out there that will create your own trust company (or something like that) that would enable you to hold your bullion yourself and still be able to call it an IRA, but the fees were something like 2% a year to do so.

No thanks, not when I can own bars without paying a fee to have them in my own hole in the backyard.

 

I've got to imagine the IRS is working hard to figure out a way to trace bullion trading to get their share of taxes in the event a big push heats up again. When you can buy and sell for cash locally, and for big gains, it's got to be making them batty.

 

More $$$ at stake in tackling the $3 trillion underground economy and the $150 billion in tax losses each year. Gains from precious metals even if gold/silver skyrocket might be $1-$5 billion a year.

 

WELL I borrowed from my 401k and paid myself back into it at 5% in 2008 and 2009 when the market was down.. didn't lose much at all.Vanguard makes you pay it back unless you meet the age. The fund wasVanguard Institutional Index Fund Institutional Plus Shares WHY BORROW FROM A BANK AND PAY THEIR FEES WHEN YOU CAN PAY YOURSELF.. NO BRAINER BUT I DIDNT BUY BULLION WITH.

 

That was about the only time that math worked. And I hope we don't get another tsunami that would enable it to work again.

 

I have no problem with that at all. I borrowed from my 401k to buy some land four years ago. I've since paid that all back. I also used my life insurance as a borrowing tool. I borrowed that as well to buy land. Also paid that back.

I'm going to tap into both again sometime soon to make the next deal happen. Each year, my buying power goes up, and I don't have to ask anyone for approval or worry about putting leins on what i'm buying. There's a ton of liberty in that.

I haven't borrowed money from any place that has a hold over me since 2007. God wililing, I may never have to do it again. Well except maybe a house.

 

ttt

 

There's one thing that pretty much no one considers when it comes to 401k loans...

They're repaid with after-tax dollars on a pre-tax basis.

Let's say you borrow $10k from your 401k and earn at a 25% federal tax rate.

Your $10k loan is charged interest at 10%. Your payments would be approximately $318 per month for the duration of the loan. Your total outlay would be $11,448 of after-tax dollars to cover an initial loan of $10,000.

Yes, your interest payments go to you, but the tax dollars go to Uncle Sam. You would have to earn $15,264 (pre-tax) to pay $11,448 (post-tax) against a $10,000 (pre-tax) loan.

Had you, instead, opted to take an early distribution from your 401k, you would have to withdraw $15,384.62 for that equivalent $10,000. No one would ever consider an early withdrawal from their 401k, except in the most dire of situations, yet a loan from one's 401k... is basically the same thing, when you crunch the numbers.

I'm no longer a financial advisor, and nothing in this post (or any of my other posts) should be construed to be financial advice. I'm merely creating a scenario to better explain some of the potential consequences of financial options.

 

Given you own multiple pieces of real estate, what do you have against borrowing against the equity in existing properties to apply toward the purchase of future properties? Generally speaking, secured loans have lower interest rates, and given we're talking about borrowing against "tax sheltered" vehicles (401k & LI), it's probably a lot less complicated in the unfortunate case of default.

I'm no longer a financial advisor, and nothing in this post (or any of my other posts) should be construed to be financial advice. I'm merely creating a scenario to better explain some of the potential consequences of financial options.