June 15, 2018
It’s natural to worry about your financial security in retirement. Saving money in Roth and Traditional 401(k) retirement plans are proving to be of little value.
Have you considered how secure your employment pension will be when the markets next fail. If not, wise up. Entrepreneur magazine published an article outlining 13 reasons why your 401(k) is not a good investment.
The biggest problem savers have today is that there are too many conditions you cannot control. Retirement plans are subject to runaway inflation, political instability, recessions, government money printing, and low interest rates.
To remedy the concerns of investors, the US Treasury introduced self-directed IRA’s which enable investors to include a broader range of investment assets in retirement plans.
Precious metal IRA’s for example, permit you to invest in gold, silver, palladium and platinum help to build a store of wealth for retirement.
The most popular choices when saving for retirement is through a 401(k) plan. And we use the term “most popular” loosely. Traditional 401(k) plans are only “popular” on the basis they are company sponsored and offered as a benefit-in-kind.
If 401(k)’s were not a condition of employment, nobody in their right mind would take these funds as an option for retirement planning.
Let’s take a closer look at the facts and compare employee-sponsored retirement plans alongside self-directed Gold IRA’s.
Gold IRA v 401(k) Plan
The key features of a retirement plan are the number of investment opportunities, tax implications, contribution limits and terms of withdrawal.
Investment Opportunities for Retirement Plans
A 401(k) plan is organised through your employer. The investment capabilities of the plan will therefore depend on the insurance company or mutual fund your employer has purchased the retirement plan from.
You don’t have any say in the matter although you do not have to accept the retirement plan your company offers. However, then you lose out on employer contributions and they make up the largest portion of your retirement package. Your hands are tied.
Both Roth and traditional 401(k) plans will usually allow you to invest up to five mutual funds in addition to contributions that are paid by the employer. You may also have the option of investing in stocks and shares of the company. Some employers do this automatically so employees have an incentive to raise performance levels.
In order to accrue a store of wealth for your retirement, you should be looking to diversify your investment portfolio. Whereas 401(k) plans are limited, self-directed Gold IRA’s allow you to add a wide range of investments tools.
Your choices include precious metals – which is rare for pension policies – common stocks, bonds, ETF’s, Certificate’s of Deposit, real estate, Money Market Accounts, and Treasury Inflation Protected Securities (TIPs).
Because a Gold IRA offers more freedom to accrue a broader range of investments, the smart move is to transfer money from an old 401(k) account or rollover funds into a self-directed IRA where you can put your money to better use.
The US government only allows investors to contribute a set amount of funds to any one account per annum. Employee 401(k) plans have a pretty high contribution limit topping off at a maximum of $55,000 (in 2018).
Employees can contribute a maximum of $18,500 for individuals aged 49 and under. Workers aged 50 or over have the option to top-up pension contributions by a further $6000.
Gold IRA’s are not as accommodating for contributions. The maximum annual amount is capped at $5,500 for investors aged 49 and under and $6,500 if you are 50 or older.
The amount of tax contributions deducted directly from your paycheck depends on the tax bracket you’re in. Roth and traditional 401 (k) plans therefore tax you at source at today’s rates.
Taxes that are tied to a Gold IRA are suspended until you come to withdraw your funds. They can therefore be filed as a tax deduction on personal income or capital gains tax when you submit your annual tax returns.
Early Withdrawals and Penalties
Withdrawing funds from either a 401(k) plan or a Gold IRA before the age of 59 ½ incur a 10% penalty on the amount you withdraw. However, there are more options with a Gold IRA. Investors are permitted to withdraw funds earlier if one of the following conditions is met:
Rolling Over a 401(k) Into A Gold IRA
Gold IRAs give you more investment opportunities to accrue a store of wealth. It therefore makes sense to roll over funds from a Roth or traditional 401(k) pension plan into a Gold IRA.