Thinking of putting an old 401K into a PM IRA. Pros & Cons?

Mission16

Is it feasible or recommended?
-About $8,000
-Haven't worked for the company in 10 years.

derryb

start here

You might consider converting (pay taxes now and not later) or rolling over (pay taxes later and not now) your 401k into an on line broker account (Scottrade?) with which you can buy and sell metal related stocks and ETFs. This was my preference after researching metal IRAs. The broker account opens up all investment possibilities vs. a strictly metal IRA.

roadrunner

<< <i>Is it feasible or recommended?
-About $8,000
-Haven't worked for the company in 10 years. >>



I agree with derryb. Not recommended going with physical metals in an IRA, especially for such a small amount. If you want physical metal buy it with after tax dollars and keep in your possession. If there's ever a
SHTF event you can be nearly certain that whatever PM's you have in an IRA, will be paid back to you in FRN's. TBonds/TNotes or an IOU. You will not get your metal back. It will have been rehypothecated a dozen times
by the time your request to get it out reaches the custodian (ie about 2-3 months for the red tape to clear).

I think we're coming to a point sometime in 2014 or 2015 when there will be some spectacular gains in the PM sector (gold and silver ETF's, miners, PM mutual funds like USAGX and TGLDX, etc.).
If you can piggy-back derryb's trades you WILL do very well.

jmski52

I removed all retirement funds from the system in 2006-2008, paid the penalties and the taxes on the gains.

When the time comes that I feel the need to get back into any type of stock issues, metal related or not, I will go with a simple online brokerage account such as derryb suggests.

Holding metals in an IRA account makes no sense and it is disadvantaged in several ways.

My attitude towards the paper markets remains highly skeptical, even though paper profits might have been possible by staying in the stock market. To paraphrase Hillary, staying in paper-assets requires "the suspension of disbelief". That's not the way I operate.

derryb

the advantage to trading in paper metal with a self-managed on line brokerage account is that one can make money with inverse ETFs while metals are losing money. ETFs are any easy way to short or go long on just about anything, they trade just like stocks with the push of a button.

ETFs

secondrepublic

<< <i>I removed all retirement funds from the system in 2006-2008, paid the penalties and the taxes on the gains. >>



Doing it now with my 401(k) from a job I left in Dec. 2013. Cashing out 1/3 this year -- rather than the full balance -- so as not to push myself into a super high tax bracket for 2014. Rest will be taken out in 2015 and 2016, or invested in stocks if/when the stock market crashes in the interim.

derryb

the advantage of converting or rolling over a 401K to a retirement account rather than cashing it in is that you are given a rare opportunity to make a large contribution to an IRA. With the rollover to a regular IRA no taxes are due until you start withdrawing from the IRA. Better yet, if you plan on being successful with your trades you should consider converting to a Roth IRA and pay taxes now on the amount converted then enjoy the benefit of no more taxes on your account - the balance and all gains are tax free.

Rollover = no taxes until time of withdrawal from the IRA, then taxed at your rate in the year withdrawn
Conversion = taxes paid up front on the amount converted (treated as additional income on your 1040) and the account balance grows taxfree.

Before deciding to trade with an brokerage cash account be fully aware of the trading restrictions involving the use of "unsettled funds" to make the next purchase. Technically a purchase made with unsettled funds has to be held until the funds settle or restrictions will be placed on the account. Usually takes three days for funds to "settle" when you sell a position. I never purchase with unsettled funds, I do not want to be caught in a situation where I am forced to hold the position while I wait for the funds used to buy it are settled - especially in volatile markets such as metals.

roadrunner

I will sometimes buy with unsettled funds in the afternoon of day 2 knowing that the next morning at 9:30 am those funds will be settled.

piecesofme

Pay the penalties and get the cash to buy physical. It'll knock you down to about $5600. I'd rather buy physical with $5600 that YOU can determine what to do with than put a dime in the market and let it get squeezed away from you. Remember that you could be having to pay fees to make the trades you want to in the PM IRA, and you may be limited as to how many moves per month you can make too. You might, just depends on the IRA I guess. I'm not versed enough to say for sure.
So either way, most likely, you'll be paying fees. Do it once and get it all over with in one swoop. jmho.

derryb

<< <i>I will sometimes buy with unsettled funds in the afternoon of day 2 knowing that the next morning at 9:30 am those funds will be settled. >>


As do I.
Which brings up another point about metal ETFs: While the market for metal futures (spot price) is almost a 24 hr. market, the market for trading ETFs (and stocks) is limited to the trading hours of the respective exchange. One must be careful holding a metal ETF overnight in that the futures (spot) price can move drastically before one is able to react with a trade during the normal equities market hours. A metal ETF can lose (or grain) value during the period that the market to trade it is closed.

secondrepublic

<< <i>Pay the penalties and get the cash to buy physical. It'll knock you down to about $5600. I'd rather buy physical with $5600 that YOU can determine what to do with than put a dime in the market and let it get squeezed away from you. >>



+1

jmski52

There are different ways to go:

1) Hold physical metal in your possession and use no leverage.

2) Hold paper metal in an account, tax-deferred or otherwise.

3) Use a leveraged trading methodology - ETF, Futures, Options, etc...

With each of these there is one unifying fact - in order to make money, you must be right more often than you are wrong. The main differences involve who is in possession of your asset(s). That's why my preference is (#1) especially right now.

derryb

<< <i>There are different ways to go:

1) Hold physical metal in your possession and use no leverage.

2) Hold paper metal in an account, tax-deferred or otherwise.

3) Use a leveraged trading methodology - ETF, Futures, Options, etc...

With each of these there is one unifying fact - in order to make money, you must be right more often than you are wrong. The main differences involve who is in possession of your asset(s). That's why my preference is (#1) especially right now. >>


Why not use number (1) for the long term and use number (2) to trade very short term. Having the availability to quickly trade (ETFs) on the small ups AND downs can be very profitable if the trades are correctly made. The volatility in metals, especially silver, creates money making opportunity even when spot price (and the value of your physical holdings) ends up right where it was two months ago.

bidask

<< <i>

<< <i>I removed all retirement funds from the system in 2006-2008, paid the penalties and the taxes on the gains. >>



Doing it now with my 401(k) from a job I left in Dec. 2013. Cashing out 1/3 this year -- rather than the full balance -- so as not to push myself into a super high tax bracket for 2014. Rest will be taken out in 2015 and 2016, or invested in stocks if/when the stock market crashes in the interim. >>

Do you need the money?

Why pay penalties on an early withdrawal from a retirement account.......?

smallchange

Why pay penalties on an early withdrawal from a retirement account.......?

Dollar may collapse
Gov't may convert some of your savings to Gov't bonds mandatory


Just thinking with my tin foil hat on tightly. Not a big concern for me as I am 60 and can start withdrawing without penalty

Jim

Musky1011

put the money into a swiss bank account..the swiss franc is stable

bidask

<< <i>Why pay penalties on an early withdrawal from a retirement account.......?

Dollar may collapse
Gov't may convert some of your savings to Gov't bonds mandatory


Just thinking with my tin foil hat on tightly. Not a big concern for me as I am 60 and can start withdrawing without penalty

Jim >>

Those are not good reasons to take a penalty for early withdrawal.

mariner67

"Those are not good reasons to take a penalty for early withdrawal. "

jmski52

Those are not good reasons to take a penalty for early withdrawal.

The tax deferred earnings in an IRA may be a smokescreen if tax rates increase, which seems mighty likely in the direction that we're headed. In fact, taxes ARE increasing beginning 2014.

The trend is towards bail-ins on savings and retirement funds. The governments have too many unfunded liabilities and debt burden to continue without attempting to squeeze revenues from every possible source. My advice is to stay out of their way.

OPA

<< <i>

<< <i>Why pay penalties on an early withdrawal from a retirement account.......?

Dollar may collapse
Gov't may convert some of your savings to Gov't bonds mandatory


Just thinking with my tin foil hat on tightly. Not a big concern for me as I am 60 and can start withdrawing without penalty

Jim >>

Those are not good reasons to take a penalty for early withdrawal. >>





Stop listening to conspiracy nuts and doomsday preppers

Mission16

Excellent and diverse advice! I prefer the idea of metals in my possession over the IRA route. But was looking for a little validation. But someone mentioned Scotttrade and the like, which are also intriguing to me. I have never directly been involved in the stock market (I move %'s and $'s around my 401k) so this is an opprotunity to dabble a bit.