I start a new job November 19. The new company has a 401k plan. My current 401k is at $5600. Would it be a good idea to cash it in and purchase gold and/or gold mining stocks? I want to diversify my investments. I do not currently own gold. What would my total taxes and penalties be if I withdraw?
Well, I too expect it to hit the fan one day. I think we will live in an entirely different world when we're both in our 60s. Right now, I would like the ability to jump ship in a relatively short amount of time to go somewhere else if and when it gets bad enough. If I do my own investment in stocks and such, I can cash that in much easier and more quickly than with a 401k or IRA. However, if I focus primarily on precious metals, I don't think that I would lose any money by retirement. I guess I need to look at the long-term trend of precious metals, and gold in particular.
@Grant.W.Underwood Perhaps its a taste of quantity I believe. While true that $5600 in Silver would not make you any wealthier in $5600 of Gold. the gold price last I checked is $1,723.00 and silver $32.56 http://www.monex.com/liveprices. Back in 2000 it was around $250. I would rather buy 170 pieces of Silver, as opposed to 3 pieces of gold with just $5600 dont you agree?But that's relative to $USD which has an intrinsic value of 0 due to being fiat?
Edit: At some point $5600 wont be able to buy any Gold perhaps. ut perhaps some amount of Silver. Also, yeah Silver is harder to come by since it is a less commoly found resource. Then there is the fact that Silver has more industry related uses then Gold. IMO I think Silver at some tipping point may sky rocket in price.
Aiser: @Grant.W.Underwood Perhaps its a taste of quantity I believe. While true that $5600 in Silver would not make you any wealthier in $5600 of Gold. the gold price last I checked is $1,723.00 and silver $32.56 http://www.monex.com/liveprices. Back in 2000 it was around $250. I would rather buy 170 pieces of Silver, as opposed to 3 pieces of gold with just $5600 dont you agree?But that's relative to $USD which has an intrinsic value of 0 due to being fiat? Edit: At some point $5600 wont be able to buy any Gold perhaps. ut perhaps some amount of Silver. Also, yeah Silver is harder to come by since it is a less commoly found resource. Then there is the fact that Silver has more industry related uses then Gold. IMO I think Silver at some tipping point may sky rocket in price.
I think you're right. However, I wouldn't have $5600 if I cash in my 401k. I would have more like $4200. I could buy an ounce or two of gold and then the rest in silver. In the long run, I don't expect to lose money at all. A stock can go to zero, a company can go bankrupt, etc. I would always have some value in my possession. Wealth would be secured in physical reality.
Another simple question. I can transfer my 401k into an IRA and invest in the following funds. Of course, it will be denominated in USD. If and when the dollar collapses, will my investments be worthless even if the markets remain strong and grow?
Wells Fargo Advantage Diversified International Fund – WIEVX Wells Fargo Advantage Asia Pacific Fund – SASPX Wells Fargo Advantage Specialized Technology Fund – WFTZX
If the dollar collapses, the purchasing power of each dollar goes down. So the question you really are asking is, will these funds accumulate dollars faster than the fall of its purchasing power?
Like another commenter before, I iniitally opted-out of my company's 401k(-like?) program. For many of the same reasons, funds were dollar denominated, many in treasuries/bonds, I'd rather store money in gold/silver, etc. I aslo got the "are you crazy?" responses from my family, some who studied finance in college, and they all said I should invest the minimum for the company-match.
I figure, if the dollar loses half its purchasing power, it simply wipes out the "free" money given to me in the form of the company match. This personally was not enough of a warm-fuzzy to go a head and participate. So I looked closer at the terms, of contributions and withdrawls.
Appearently, in my company's 401k program(not sure what your's says), I can contribute on an after-tax basis. Company still matches the contributions (money that should have been mine anyway), with no penalties. The Kicker here is that I can withdrawl the after-tax contributions only, anytime, for any reason, no questions, no penalties. The only drawback, is it has to take equal percentage of gains (if any exist) on the after-tax contributions. These gains are themselves are taxable, as ordinary income.
Thus, my strategy is to contribute the bare minimum required to get the maximum company match. Yes, company match funds are tied up until I retire, and who knows how the rules will change in the future, but the alternative is a guaranteed no match money. Every couple of months, I withdrawl my after-tax contributions (w/gains if any) and then re-invest them in my own personal investment accounts. Where I can invest in foreign securities denominated in foreign currency, or into phsical gold/silver.
I pay a minimum penalty on the withdraw of the gains, and have a minimum risk of the after-tax contributions still invested in the 401k. But for the most part, I can invest the way I want, and still get the company match, which may or may not be there when I retire.
My suggestion, would be to look closely at the terms of your 401k. Can you make after-tax contributions and withdraw them penalty free? If so, that would expand your investment opportunities. Otherwise, I don't know if the company match would be worth having large sums of your savings in a restricted numer of dollar denominated funds managed by someone your employeer choses.
Prime: A quick note on mining stocks. Remember, the reasons we expect for gold to increase in value, such as inflation or hyperinflation, are also reasons that cost mining companies more money to extract gold. What I'm saying is if we have hyper inflation, you can bet that the energy required to mine gold, the wages paid to labor, etc.. are also increasing. It may not be as profitable as some believe. Not saying it is bad by any means, but just because gold shoots up doesn't necessarily mean the mining companies will be as successful.
A quick note on mining stocks. Remember, the reasons we expect for gold to increase in value, such as inflation or hyperinflation, are also reasons that cost mining companies more money to extract gold. What I'm saying is if we have hyper inflation, you can bet that the energy required to mine gold, the wages paid to labor, etc.. are also increasing. It may not be as profitable as some believe. Not saying it is bad by any means, but just because gold shoots up doesn't necessarily mean the mining companies will be as successful.
For mines more than half of the cost is usually fixed in infastructure. Hyperinflation reduces these costs to nothing and revenue goes up with hyperinflation. So if revenue goes up and more than half your costs go to zero you come out way ahead.
For example, if a mine buys a 300 million dollar mill that will last 30 years and they cost it out at 10 million dollars a year so every year they're expensing 10 million dollars for it. If hyperinflation occurs the 10 million fixed cost ends up being basically zero.