Does anyone know the best way to use a 401k to buy gold/silver?

dsessom

My girlfriend has expressed interest in investing in gold and silver (particularly silver), and has a decent 401K account that she would like to use some of the funds from to purchase gold and/or silver. What is the best way to go about this?

I was thinking she could roll over to gold ETF, or get a loan on the 401k and purchase gold/silver (this way should could take physical possession).

Is this correct? Any input or advise is appreciated!

Thanks!

JCMhouston

Often 401K's cannot be rolled over or transferred as long as she remains an emplyee of the company, and very few of these plans offer GLD or SLV as options for investment.

About the only thing she could do would be to take a loan (typically max of 50% of vested value) then buy PM's either as physical or ETF's. I won't comment on the wisdom of taking loans in 401K's as is it different for individual cases.

dsessom

Yes, I should have mentioned that she is not with the company in which the 401k originated, so it is no longer being contributed into - it's now just dormant, which is why she wants to reinvest a good portion of it into gold and/or silver.

FistFullOfDollars

She might want to look in to rolling the 401k over to a Etrade or TDAmeritrade 401k account, she might be able to invest in SLV or GLD.

secondrepublic

My company's 401(k) is with Schwab and offers a feature called a Personal Choice Retirement Account (PCRA). The PCRA allows you to invest in virtually any individual stock, ETF, mutual fund, etc. through an online brokerage account window. I have been trading in and out of ZSL (a double-short silver fund) using the PCRA, and you can also buy GLD, SLV, and others. I would suggest she check her summary plan description (SPD) or get in touch with plan administrator to see if the PCRA or something similar is available. My employer doesn't widely advertise the fact that it's available.

piecesofme

get a loan on the 401k and purchase gold/silver (this way should could take physical possession

This is the only way she could take physical possession. It's exactly what I did about 3 months ago. The loan is 3.75% for 5 years, but if you think about it, I am just paying myself back and as long as the metal of your choice is continuing to gain at leats 3.75%, I am not losing anything. I am using the cash to make larger purchases of the metal, which every time so far has allowed me to get a better price when phyically purchasing it. I deal with some dealers that sell cheaper if more is bought. I keep what I want to out of the purchase, and sell the rest for at least more than 3.75% to at the very least stay even. Meanwhile, I am stockpiling my pile at a discount because cash is still king and allows me to buy in physically cheaper. So far the plan has been working like a charm.
Hope this helps.

guitarwes

"This plan always works best when "things" are making new highs. Not so much when they are not. MJ"

This quote taken from another thread about a planned retirement plan. Also could be said about the OP's intentions and of piecesofme's reply. Not saying anything is wrong with doing that, just have a backup IF anything goes south and you have to repay the loan with money from somewhere else. Precious Metal is not looking to go south, but no one knows for 100% certainty what is going to happen.

derryb

roll over to self-managed on-line IRA (I am happy with Scottrade) with no tax consequences. Or, convert to self-managed on-line Roth IRA with tax consequences now (all future money in the account is tax free when withdrawn, including original deposit). I chose Roth, paid the taxes from the amount I converted (be sure you understand the immediate tax bite and possible 10% penalty) and was able to regain my paid taxes in a short period of time with the climb in metals. Note that the tax payment on a Roth is due as a quarterly tax payment, not at the end of the year. Now everything in the account is tax free when withdrawn. Use the on-line account to buy whatever equities you like. I prefer the precious metal ETFs (similar to mutual funds but trade like stock symbols at the on-line brokers regular fee, $7 per trade with Scottrade). Here's a good site for ETF research:

Precious Metal ETFs

I prefer the leveraged 2X silver ETF AGQ

pf70collector

I can see those Roth IRAs being dismantled by the government if we don't get our debt under control. They will look at everything that is a possible tax loophole. If they want to gut Social Security, Medicare....what's to stop them from gutting these Roth IRAs too in the future.

Spooly

Roll over to self-managed on-line IRA (I am happy with Scottrade) with no tax consequences.


That's what I did.... I love it!

secondrepublic

<< <i>I can see those Roth IRAs being dismantled by the government if we don't get our debt under control. They will look at everything that is a possible tax loophole. If they want to gut Social Security, Medicare....what's to stop them from gutting these Roth IRAs too in the future. >>



I've been saying that for years. Don't be surprised if someday these supposedly "tax free" withdrawals from Roths are hit with a surtax of some kind.

DrBuster

<< <i>

<< <i>I can see those Roth IRAs being dismantled by the government if we don't get our debt under control. They will look at everything that is a possible tax loophole. If they want to gut Social Security, Medicare....what's to stop them from gutting these Roth IRAs too in the future. >>



I've been saying that for years. Don't be surprised if someday these supposedly "tax free" withdrawals from Roths are hit with a surtax of some kind. >>



Bet on it.

derryb

<< <i>

<< <i>

<< <i>I can see those Roth IRAs being dismantled by the government if we don't get our debt under control. They will look at everything that is a possible tax loophole. If they want to gut Social Security, Medicare....what's to stop them from gutting these Roth IRAs too in the future. >>



I've been saying that for years. Don't be surprised if someday these supposedly "tax free" withdrawals from Roths are hit with a surtax of some kind. >>



Bet on it. >>


I can see them confiscating gold but that doesn't stop me from stacking it. Those that fear what they might do should limit their investments to a shoe box full of dollars.

secondrepublic

<< <i>
I can see them confiscating gold but that doesn't stop me from stacking it. Those that fear what they might do should limit their investments to a shoe box full of dollars. >>



Good luck "confiscating" gold. What are they going to do, search every home? Unlikely. They will take the path of least resistance. Throwing up a new tax is easy because Roth brokerage account trustees will make sure it's paid.

derryb

the rich created Roths for themselves. don't look for them to increase their own taxes.



<< <i>Good luck "confiscating" gold. What are they going to do, search every home? >>


The goal of the next confiscation will not be to take it from everyone, it will be to put a halt to the demand for it. Accomplishing this will further prop up their "preferred" investment class, the equities market. Confiscation will prevent anyone from buying or selling gold. Those that choose to not turn it in (at the buyback price) will be forced to hide it. Having a truck load of hidden gold serves no purpose when it has to stay hidden indefinitely.

Heavily taxing the sale of precious metals is another method they may try to halt the trading of it.

dsessom

All good info! Feel free to keep it going.

At this point, it looks like my original idea of borrowing against the 401k is the best (perhaps only) way to purchase physical gold and silver, and then sell off small amounts to cover monthy payments and interest. If silver keeps going as it has, a 3.5 or 4% interest loan is NOTHING compared to the gains that the silver itself will make.

Gold (dollar for dollar) has slower growth, but seems a solid long term investment. Silver (dollar for dollar) seems to be the better short term investment.

Gold has gained roughly 35% in the last year, where silver has gained roughly about 120%. Am I on the right track?

piecesofme

If silver keeps going as it has, a 3.5 or 4% interest loan is NOTHING compared to the gains that the silver itself will make.

I can attest to that. It was an extremely tough decision for me to do the loan thing, lost a few nights sleep contemplating it, but it has worked out so far very nicely. Not bragging, just being honest.

"This plan always works best when "things" are making new highs. Not so much when they are not. MJ"
This quote taken from another thread about a planned retirement plan. Also could be said about the OP's intentions and of piecesofme's reply. Not saying anything is wrong with doing that, just have a backup IF anything goes south and you have to repay the loan with money from somewhere else. Precious Metal is not looking to go south, but no one knows for 100% certainty what is going to happen

This is the part that cost me a few nights sleep lol. I feel I've protected myself by always keeping enough of the cash that came from the loan on hand to pay back in full if things turn as guitarwes suggested can happen. Of course, initially you have to take a chance and spend more than you have, but that's why I sell what I don't want out of what I purchased fairly quickly and for at least for the loan interest rate of 3.75%. You defintely have to have some strict self control and don't get greedy and know exactly where you're at with it all at all times for it to work and not get behind the 8-ball, but if you can manage your emotions, you'll do alright at it and add to the pile on the cheap.
Best of luck in what you decide to do Dwayne.

Wingsrule

What would you / your GF had done had you made this move during the last week in April and a week later find out you have 30% less than what you started with? Hold? Increase your holdings? Sell in a panic?

If "you" can't truthfully answer these questions, IMO "you" are playing with fire and not ready for such a risk.

Please note this is not a personal attack - "you" is being used in the plural.

If one has enough cash to pay back the loan, then why not invest that money in PMs instead and continue to enjoy the benefits of the compounding of the original 401(k).

Wingsrule

And for the record, I still do have some physical I bought the weekend before the bottom fell out.

TWQG

<< <i>Yes, I should have mentioned that she is not with the company in which the 401k originated, so it is no longer being contributed into - it's now just dormant, which is why she wants to reinvest a good portion of it into gold and/or silver. >>



A loan is not an option under these circumstances. She has to open a rollover IRA.
For those borrowing against your 401k's, the loan becomes due in full if/when you lose your job.

derryb

<< <i>

<< <i>Yes, I should have mentioned that she is not with the company in which the 401k originated, so it is no longer being contributed into - it's now just dormant, which is why she wants to reinvest a good portion of it into gold and/or silver. >>



A loan is not an option under these circumstances. She has to open a rollover IRA.
For those borrowing against your 401k's, the loan becomes due in full if/when you lose your job. >>


correct, and full loan repayment is due before you retire.



<< <i>If one has enough cash to pay back the loan, then why not invest that money in PMs instead and continue to enjoy the benefits of the compounding of the original 401(k). >>


borrowing money (even from yourself) for an investment is as bad an idea as borrowing money to go to the racetrack.

Spooly

<< <i>What would you / your GF had done had you made this move during the last week in April and a week later find out you have 30% less than what you started with? Hold? Increase your holdings? Sell in a panic?

If "you" can't truthfully answer these questions, IMO "you" are playing with fire and not ready for such a risk.

Please note this is not a personal attack - "you" is being used in the plural.

If one has enough cash to pay back the loan, then why not invest that money in PMs instead and continue to enjoy the benefits of the compounding of the original 401(k). >>



I agree! Playing the gold/silver market with borrowed money is a bad idea.

jmski52

At this point, it looks like my original idea of borrowing against the 401k is the best (perhaps only) way to purchase physical gold and silver

The other option - you can liquidate the 401K and pay the taxes & penalties - then buy your physical precious metals with the proceeds.

There are risk tradeoffs in anything you do. I happen to think that the risk in holding a 401K has exceeded the risk in holding physical precious metals for some time now. Given the budget and spending impasse, I think that the risk differential between those two alternatives continues to widen, in favor of the metals - even at today's prices. My opinion, of course.

piecesofme

The OP asked how to use the $ in the 401k to be able to by physical metals, not paper, and I offered advice on what I have done because I went thru the exact same dillema recently and fortunately have made my own luck rather than letting MY money sit in a 401k that has no metals play available.
I simply am saying that either taking a loan or cashing it out is the only way to use the money to buy physical metals. If I am wrong about this, please correct me.

derryb

<< <i>The OP asked how to use the $ in the 401k to be able to by physical metals, not paper, and I offered advice on what I have done because I went thru the exact same dillema recently and fortunately have made my own luck rather than letting MY money sit in a 401k that has no metals play available.
I simply am saying that either taking a loan or cashing it out is the only way to use the money to buy physical metals. If I am wrong about this, please correct me. >>


OP also mentioned he/she is considering ETFs which are not physical. Yes, funds have to be converted to cash to buy physical metals (except for a precious metals IRA which I have researched for myself and ruled out for a number of reasons).



<< <i>The other option - you can liquidate the 401K and pay the taxes & penalties - then buy your physical precious metals with the proceeds. >>


Any future gains from this strategy would be taxable upon future sale of the physical metal. Only way to avoid taxes on future gains is via Roth IRA and paper investments. Taxes and penalties on liquidation would be the same as converting it to a Roth. Both senarios create the same taxes and penality. Cashed out or converted funds would both be considered income for that year. In either event it is important to realize that any taxes due from the event need to be paid for the quarter, not at the end of the year. Otherwise taxpayer will be penalized at end of tax year for underpayment of taxes. Been there.

jmski52

Any future gains from this strategy would be taxable upon future sale of the physical metal.

Normally, this would seem to be a one of the easiest justifications you could make in favor of keeping the funds in a tax-deferred financial instrument. But let's re-examine this logic. Any profits from funds left in any tax-deferred financial instrument will also be taxable upon future sale of the financial instrument.

Knowing what we now know, I firmly believe that marginal tax rates will be going up, state and local taxes will be going up, the inflation tax will be going up as well - and the ability to cash in on vested retirement plan monies could somehow become encumbered. Money will be harder to come by and credit will be much more expensive.

There's a value in knowing you have resources that you can actually tap into when you need them. If you don't already have a leg up and a solvent financial footing, it's not going to be any easier to get that way on an individual basis or collectively either.

derryb

<< <i>Any future gains from this strategy would be taxable upon future sale of the physical metal.

Normally, this would seem to be a one of the easiest justifications you could make in favor of keeping the funds in a tax-deferred financial instrument. But let's re-examine this logic. Any profits from funds left in any tax-deferred financial instrument will also be taxable upon future sale of the financial instrument.

Knowing what we now know, I firmly believe that marginal tax rates will be going up, state and local taxes will be going up, the inflation tax will be going up as well - and the ability to cash in on vested retirement plan monies could somehow become encumbered. Money will be harder to come by and credit will be much more expensive.

There's a value in knowing you have resources that you can actually tap into when you need them. If you don't already have a leg up and a solvent financial footing, it's not going to be any easier to get that way on an individual basis or collectively either. >>



As stated earlier, A Roth avoids all capital gains taxes. Taxes are deferred in a regular IRA because contributions are not taxed, they are completely avoided with a Roth IRA because the contributions are taxed in year deposited. Your logic (and I agree) on tax rates going up in the future is further reason to take the tax hit now (at a lower rate) with a Roth IRA and enjoy tax free gains in the future. This is especially true if your investment in PMs continues its record returns.

dsessom

I think the plan will be this:

Roll the 401k to a ROTH IRA (probably at a local bank), and link it to her ETRADE account. This way she has the most freedom of investing it however she likes. She can borrow against it to buy physical metals, or ETFs via ETRADE. Either way, she does have a bit of a safety net incase things go South. She already owns several hundered ounces of silver, which are not a part of the 401k funds.

derryb

Going to a Roth is called a conversion. Going to a regular IRA is called a rollover. talk to a tax advisor so that you are sure of all tax consequences and when they are due. If it is a great sum you may want to do it half this year and half next year depending on what tax bracket it throws you into. Be sure that all will go according to how you think it will before you commit yourself.

Talk to the people managing the 401K first. There may be limitations with the 401K.

yellowkid

IMHO there are a number of reasons why this is just a bad idea. Leave the 401k alone, and find some way of accumulating PM's as you go along. PM's accumulate tax free until you sell them anyhow, why tell the government you have them now? Is the 401k getting matching money? Pm's don't.
Find a way to finance some systematic purchase of PM's outside the 401k, that way you get to cover more of the spread.

dontippet

<< <i>All good info! Feel free to keep it going.

At this point, it looks like my original idea of borrowing against the 401k is the best (perhaps only) way to purchase physical gold and silver, and then sell off small amounts to cover monthy payments and interest. If silver keeps going as it has, a 3.5 or 4% interest loan is NOTHING compared to the gains that the silver itself will make.

Gold (dollar for dollar) has slower growth, but seems a solid long term investment. Silver (dollar for dollar) seems to be the better short term investment.

Gold has gained roughly 35% in the last year, where silver has gained roughly about 120%. Am I on the right track? >>



Silver has gained 120% in the past year, therefore, it could go down 120% in the next year. What if you took out a loan, and silver only went down 30%. Would you be able to fork out the extra dough to pay back the loan? Don't forget, silver recently went from $49.82 to $32 which is a 35% drop. You are looking at this as if silver will continue to increase in value, which it very well may do. But by taking out a loan, you must repay it, no matter if your loan has increased in value or decreased in value.

dsessom

<< <i>

<< <i>All good info! Feel free to keep it going.

At this point, it looks like my original idea of borrowing against the 401k is the best (perhaps only) way to purchase physical gold and silver, and then sell off small amounts to cover monthy payments and interest. If silver keeps going as it has, a 3.5 or 4% interest loan is NOTHING compared to the gains that the silver itself will make.

Gold (dollar for dollar) has slower growth, but seems a solid long term investment. Silver (dollar for dollar) seems to be the better short term investment.

Gold has gained roughly 35% in the last year, where silver has gained roughly about 120%. Am I on the right track? >>



Silver has gained 120% in the past year, therefore, it could go down 120% in the next year. What if you took out a loan, and silver only went down 30%. Would you be able to fork out the extra dough to pay back the loan? Don't forget, silver recently went from $49.82 to $32 which is a 35% drop. You are looking at this as if silver will continue to increase in value, which it very well may do. But by taking out a loan, you must repay it, no matter if your loan has increased in value or decreased in value. >>



Correct, and yes we have a backup funding source incase things go South, but she can also afford to sit on the silver/gold for a years if need be as well.

fiveNdime

my 401K allows for some self managed investments, SLV is not one of the options.



<< <i>A Roth avoids all capital gains taxes. Taxes are deferred in a regular IRA because contributions are not taxed, they are completely avoided with a Roth IRA because the contributions are taxed in year deposited. Your logic (and I agree) on tax rates going up in the future is further reason to take the tax hit now (at a lower rate) with a Roth IRA and enjoy tax free gains in the future. >>


is a 401K taxed as capital gains upon distribution?

i have also been contemplating moving some $$ out of the 401K(for the possible rate hike reasons above) to the ROTH, but havent fully looked at the tax consequences yet.


in lieu of a conversion...
is there any logic to taking a loan against the 401K, depositing 100% in a ROTH, while repaying the loan to the 401K?
i pay myself 9% on a loan.
this results in taxes being paid twice, correct?

pf70collector

I have no options in my 401k. My investment options are either Stock or Money Market Funds. I took a loan out on Jan 1 and paying myself 4.5% interest. I bought some precious metals but only about 250 ounces of Silver. No Gold.

derryb

<< <i>my 401K allows for some self managed investments, SLV is not one of the options.



<< <i>A Roth avoids all capital gains taxes. Taxes are deferred in a regular IRA because contributions are not taxed, they are completely avoided with a Roth IRA because the contributions are taxed in year deposited. Your logic (and I agree) on tax rates going up in the future is further reason to take the tax hit now (at a lower rate) with a Roth IRA and enjoy tax free gains in the future. >>


is a 401K taxed as capital gains upon distribution? >>


Yes, contributions were made with pre-tax dollars as are contributions to a regular IRA. Big difference between the regular IRA (and 401K) and the Roth IRA is when you get taxed. If your goal is to make gains with your investment you definitely want to pay taxes now before your money grows. Also taxes paid later will probably be at a higher rate as Washington digs deeper into your pockets.



<< <i>i have also been contemplating moving some $$ out of the 401K(for the possible rate hike reasons above) to the ROTH, but havent fully looked at the tax consequences yet. >>


Money converted from a 401k or regular IRA to a Roth IRA is considered income for the year and taxed at your rate. If you are not yet eligible to make penalty free withdrawals (retirement age) then you will also be hit with a 10% penalty. Since the conversion is considered a withdrawal and a penalty will be paid on it, if necessary you should keep some of the cash to cover the tax and penalty you will owe the IRS in the current year. The tax and penalty are drawbacks but if you make good investments you can come out ahead. I converted, paid the tax (no penalty, I was retirement age) invested in AGQ and recovered my tax and penalty in six months and am now way ahead of the curve. The conversion method is a loophole that allows one to deposit unlimited funds into a Roth IRA. Regular contributions to all IRAs are limited. We all know tax rates are headed up, best to pay them up front with a Roth and earn tax free gains. If you are converting a large sum, you might consider breaking into two conversions over two years to avoid a higher tax bracket because of the additional "income" you have to claim. It is "income" with a roth conversion and it is not "income" with a regular IRA rollover. Never take physical possesion of funds being rolled over or converted, it may change the tax rules on you - have it moved from one account to the other. Talk to the manager of your current 401k, they established the specific rules for your 401k.




<< <i>in lieu of a conversion...
is there any logic to taking a loan against the 401K, depositing 100% in a ROTH, while repaying the loan to the 401K?
i pay myself 9% on a loan.
this results in taxes being paid twice, correct? >>


No, you are limited to contributions to any IRA unless it is a direct rollover to a regular IRA (unlimited) or a direct conversion to a Roth (unlimited). Before I retired and converted to a Roth, I took a $25K loan on my 401K (actually a federal employee Thrift Savings Plan) and purchased physical silver at $9. Tripled my money and paid the loan off in one year right before I retired. Drawback is that you have to pay back loan before you retire or the full amount becomes taxable. Also research the conditions should you become unemployed before it is paid back. Also since conversions are taxable income you will want to take some of it in cash to cover your taxes for the current year (and possible 10% penalty). This lowers your converted amount which means you need a rock solid investment to recover. Silver worked great for me.

morgantype

<< <i>my 401K allows for some self managed investments, SLV is not one of the options.



<< <i>A Roth avoids all capital gains taxes. Taxes are deferred in a regular IRA because contributions are not taxed, they are completely avoided with a Roth IRA because the contributions are taxed in year deposited. Your logic (and I agree) on tax rates going up in the future is further reason to take the tax hit now (at a lower rate) with a Roth IRA and enjoy tax free gains in the future. >>


is a 401K taxed as capital gains upon distribution?

i have also been contemplating moving some $$ out of the 401K(for the possible rate hike reasons above) to the ROTH, but havent fully looked at the tax consequences yet.


in lieu of a conversion...
is there any logic to taking a loan against the 401K, depositing 100% in a ROTH, while repaying the loan to the 401K?
i pay myself 9% on a loan.
this results in taxes being paid twice, correct? >>



I am about 90% sure 401k money is taxed as ordinary (ie w-2 money) income when withdrawn. Please correct me if I am wrong.

Also, with regards to the 401k loans and repayment:

IIRC, loans must be repaid with POST TAX dollars. And then, you will have to pay income tax AGAIN when you withdraw your loan repayments.

The way It looks to me is: you borrow 100 from the 401k, you repay yourself the 100 (disregard interest in this example) you need to "make" 143 dollars, less payroll taxes to pay yourself the 100 back. So the government just took 43 bucks from you.(assuming a 30% tax bracket)

Next, the 100 you repaid yourself, will get taxed again at the prevailing rate when you withdraw (assuming same 30% tax bracket and withdrawing after 59.5 years old) so you will end up with 70 bucks of the 143 you had to "make" to repay yourself.

So in essence, the 100 you borrowed, will have to grow by 43% to break even onthe loan. Notice i said break even.

So, if you did this, and bought silver today with the money, silver would have to go to 57.71 roughly to break even.

I investigated this a few years ago, and this is the conclusion I came to.

Please, if I am wrong enlighten my ignorance.

Wingsrule

Morgantype brings up some interesting points.

Assume you are paying back your loan at 5% interest.

You need to consider the 28% tax on your profits when you sell (treated as a collectible, not a capital gain), depending on what type of account (or cash) you finally end up with.
You are paying back that interest with dollars that have already been taxed once.
You also have the opportunity cost of pulling that money out 'early' (i.e. what would it have done had you left it in the 401(k))?

In any case, given the large numbers of things that need to be considered, I would get a CPA / Accountant / Tax planner involved with the decision.

Best of luck to you, whatever you decide.

Edited for spelling

Justacommeman

I didn't read the entire thread but the only way I would own PM ETF's (GLD/SLV) is in a tax deferred account such as a 401K. Otherwise you will pay 28% (collector rate) as opposed to 15%. Bond, REIT and GLD/SLV ETFS should be held in tax deferred accounts. MJ

roadrunner

While not as safe as physical gold, there are also miner mutual funds such as USAGX, TGLDX, GOLDX, USERX, to name a few of them. And there's also GDX and GDXJ, all of which would
not be taxed at the 28% collectible rate if held > 1yr. When it comes down to it, your 401K is only as safe as the govt and the institution managing it for you. They can lose your physical gold in just as many ways as paper gold. In the longer run I do think that gold/silver equities/funds will outpace bullion funds. And should physical gold or silver ever come under pressure by the govt, then miners might be a good alternative....at least until they join the party and get nationalized.

With all the scuttlebut about whether SLV has all the silver they are supposed to (and then GLD by association) I don't think I'd be comfortable holding those 2 vehicles for anything but short term trading. Those aren't investments in gold and silver, but in gold/silver paper. CEF, GTU, and PHYS are examples of Canadian funds that do a better job of actual securing the physical metal and auditing it physically multiple times per year. And by filing the right paper each year one can avoid the 28% collectibles rate that GLD and SLV would be hit with. Still, in all of these vehicles there is at least one person between you are your metal, and likely more. And if shtf, who knows who will be the first to claim ownership on all the metal sitting in these funds. All we do know is that Joe and Jane6P will have last dibs.

roadrunner

derryb

Should I take a 401k Loan?

morgantype

401(k) Loan Fact 7 - Negative Tax Impact

When you pay back your loan, you do so with post-tax (after-tax) dollars. Consequently, a $100 loan repayment reduces your take-home pay by $100. Worse, when you take the money out of your 401(k) plan during retirement, you will pay tax on the same money again.

gsa1fan

Personal fact;

My 401K was wacked in half 2002. I took a max 3 year loan against it. Bought PM's & coins with loan $$.

2008 401K wacked in half again and in 2011 just 1% over what it was prior to 2008 WACK.

My total worth of PM's & coins now exceeds my 401K by 60% - FACT just sharing my personal experience

Do what ever feels good to you! I sleep well at night

I will also add all the "experts" writing what you "should" do with your 401K make a living off your $$ being kept in a 401K.

ttown

<< <i>401(k) Loan Fact 7 - Negative Tax Impact

When you pay back your loan, you do so with post-tax (after-tax) dollars. Consequently, a $100 loan repayment reduces your take-home pay by $100. Worse, when you take the money out of your 401(k) plan during retirement, you will pay tax on the same money again. >>



Hum, haven't seen a loan yet that isn't paid back with after tax dollars bank or 401k. I've done the same thing as GSA1FAN. Paid back my loans, got my PM's, took some money out of the stock market that was way too heavy anyway, made some money on the 1/2 dips every 5 years, and got 4.5% interest while doing so. Of course the loans were all 1 to 2 year loans so if I got laid off I could pay them back easy.

My 401k loans were part of what I considered my safe investments like you'd use bonds for.

jmski52

In 2006-2008, I liquidated all of mine and my fiancee's retirement savings from every account we had and bought generic gold, silver, platinum, and also the 2006-W, 2007-W & 2008-W dated Mint issues of AGEs, Buffs and Plats, both proof and unc.

We paid the taxes and the penalties, and it was a killer to see how much the govt is going to take. It would've happened after retirement to some degree as well. If the tax rates go up, the 10% penalty may look like a bargain.

We are now way up, and I continue to buy precious metals when we accumulate enough cash to make a large enough purchase.

The best feature of taking possession is that there is no paper trail from this point forward. I don't have to get Timmy the Tax Cheat's permission to utilize my own money now.

derryb

<< <i>Does anyone know the best way to use a 401k to buy gold/silver? >>


The simple answer: Convert it to cash for physical purchases or convert it to brokerage IRA for equities purchases. Talk to a tax advisor first.

morgantype

<< <i>

The best feature of taking possession is that there is no paper trail from this point forward. I don't have to get Timmy the Tax Cheat's permission to utilize my own money now. >>



This point above is worth keeping in mind.

Also, I think we should all be cautious about looking back at PMs and using that for making the case to take the same plunge today.

I wish I would have been as prescient as others on the board who made killings on PMs the past few years.

Good luck, and stay balanced, don't put all your "golden eggs" in one basket.

derryb

<< <i>

<< <i>

The best feature of taking possession is that there is no paper trail from this point forward. I don't have to get Timmy the Tax Cheat's permission to utilize my own money now. >>



This point above is worth keeping in mind.

Also, I think we should all be cautious about looking back at PMs and using that for making the case to take the same plunge today.

I wish I would have been as prescient as others on the board who made killings on PMs the past few years.

Good luck, and stay balanced, don't put all your "golden eggs" in one basket. >>


Unless you buy with cash, sell for cash in the future and don't deposit that cash into an account, there will always be an electronic trail of the money flow that you may have to explain to the tax man. Transaction of $10K are more are required to be reported if cash. If buying with cash, do so in amounts of less than $10k with the same dealer. He is required to report cumulative transactions over $10k. Electronic transactions are a paper trail.

Wingsrule

Transaction of $10K are more are required to be reported even if cash.

I do not believe this to be true. If I write you a check for a large batch of stuff, i.e. >$10K, there are no forms required. Unless, of course, you are considering the physical 'check' as a form.

Where's the good Capn when we need him to verify?

pf70collector

401K=Paper or just electronic numbers in a computer which could be placed under government control by an executive order. I just want to be in total control of some of my wealth. In a major stock market crash I can see the government freezing all 401Ks and suspend trading on the NYSE just like they declared bank holidays in the past. To each his own.

gsa1fan

<< <i>401K=Paper or just electronic numbers in a computer which could be placed under government control by an executive order. I just want to be in total control of some of my wealth. In a major stock market crash I can see the government freezing all 401Ks and suspend trading on the NYSE just like they declared bank holidays in the past. To each his own. >>



+1

morgansforever

My 401k is a joke, would have been better off putting cash under my
mattress, and using the rest to buy PMs. Recently laid off and called Vanguard
about cashing out and converting it to gold. 20% early penalty fee before taxes,
then income tax for the money grubbing Gutment. I would get the crumbs, that's damn near
1/2 right off the top.