Every year millions of Americans are faced with the challenge of managing their finances and making critical decisions about the money in their 401K plans that they accumulated while they were still working. Most financial experts recommend to roll a 401K plan over into an IRA or Individual Retirement plan.
With an IRA, you can invest in different types of investments. While its obvious you can invest in stocks, bond, and mutual funds in an IRA, did you know that you can also put your money in certificate of deposits, Real Estate Investment Trusts (REIT) and even exotic investments like oil and gas leases?
Really, there are many investment choices, however, if you are the conservative type of investor, you should invest in gold. Why? Read below to know the top five reasons for investing in gold.
By gold investment, we do mean buying tangible, investment-grade gold bullion and bars, certificates forms of gold, and gold commemorative coins.
1. Gold does not lose value.
Unlike stocks, gold does not depreciate in value. No matter what state the economy is in, there will always be ready buyers of gold. Also, in case you didn’t know it yet, gold bars protect an economy against inflation and other economic mood swings. In other words, economies always have gold bars to match the money that is being circulated in the market.
2. 401K plans are vulnerable.
When you really think about it, 401K plans are vulnerable because they invest in different stocks. It doesn’t take a genius to know that stock investments can be risky because stock prices can swing back and forth between extreme high and extreme low depending on which company stocks you are investing in.
3. You can’t use 401K plans in an emergency.
One of the biggest arguments against 401K plans is that they can work against you in an emergency. If you’re like most people, you probably do NOT have six-months worth of your income stashed away as an emergency fund. And when an emergency does happen, you might be tempted to have early access into your 401K plan, however, that is a costly plan because you will need to pay 10% penalty plus income tax.
4. Higher taxes on 401K plans.
Although you don’t need to pay taxes on your 401K plan until you make a withdrawal, the fact is that you do pay higher taxes. The highest tax bracket on 401K is at 39.6%. With gold, since it is considered a collectible by the IRS, you will only be taxed 28% on your capital gains.
5. High fees on 401K.
Even when you don’t make an early 401K withdrawal, you still pay different types of fees on your investments, like plan administration fees, management fees, investment fees, individual service fees and sales charges. If you do the math, a couple will pay between $150,000 to $200,000 in 401K fees within their lifetime. If that doesn’t sound like a lot of money, we don’t know what will.
With all the reasons mentioned above, there really is no reason why you shouldn’t roll over your 401K to invest in gold.