IRS Warns Against Keeping IRA Funds In Gold At Home

My only comment regarding storing physical gold inside an IRA is analogous to the wolf guarding the hen house.  Sure, it's legal to do so, but why would you?

http://www.zerohedge.com/news/2016-09-07/irs-warns-against-keeping-ira-funds-gold-home

Why Putting Gold into an IRA is a Dumb Idea

https://investorjunkie.com/34727/gold-ira-dumb-idea/

Government wants to nationalize your 401K/IRA

If this passes, watch the stock markets collapse. Wow, the government is really eager to raise revenue. Whether you are a Democrat, Republican, Independent, Libertarian, or from Mars, passage of this proposal should concern you.

http://republicanleader.house.gov/News/DocumentSingle.aspx?DocumentID=183859

Dear Secretaries Solis and Geithner:

As members of the Republican Savings Solutions Group, we write today to express our strong opposition to any proposal to eliminate or federalize private-sector defined contribution pension plans, such as 401(k)s, or impose burdensome new requirements upon the businesses, large and small, who choose to offer these plans to their employees.

In the Annual Report of the White House Task Force on the Middle Class, Vice President Biden discussed at length the creation of so-called “Guaranteed Retirement Accounts, (GRAs)” which would provide for protection from “inflation and market risk” and potentially “guarantee a specified real return above the rate of inflation” – presumably at taxpayer expense. In the Report, the Vice President recommended “further study of these issues.”

The Vice President’s comments are troubling, insofar as they come on the heels of testimony before Congress from supporters of GRAs proposing to eliminate the favorable tax treatment currently afforded to 401(k) plans, and instead use those dollars to fund government-invested GRAs into which all employees would be required to contribute a portion of their salary – again, with a government subsidy. These advocates would, essentially, dismantle the present private-sector 401(k) system, replacing it instead with a government-run investment plan, the size and scope of which remain to be seen. This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.

In light of these facts, we write today to express our opposition in the strongest terms to any effort to “nationalize” the private 401(k) system, or any proposal that would dismantle or disfavor the private 401(k) system in favor of a government-run retirement security regime.

Sincerely,

House Republican Leader John Boehner (R-OH)
Rep. John Kline (R-MN)
Rep. Dave Camp (R-MI)
Rep. Sam Johnson (R-TX)
Rep. Dean Heller (R-NV)
Rep. Brett Guthrie (R-KY)
Rep. Michele Bachmann (R-MN)
Rep. Pat Tiberi (R-OH)
Rep. Bob Latta (R-OH)
Rep. Erik Paulsen (R-MN)
Rep. Lynn Jenkins (R-KS)
Rep. Ed Royce (R-CA)
Rep. Buck McKeon (R-CA)

Attention: Career Transitioners

It's a touchy subject, but a real one that needs to be dealt with: many in corporate America are being downsized--they're getting laid off. Some have emergency reserves to last them a few months while they land back on their feet. In this tough job market, a few months of unemployment may last a few quarters.

Whichever the case, if cash reserves are insufficient for living expenses, many have to resort to dipping into their qualified retirement savings plans, whether they are 401K's or IRA's. The catch is that if the candidate is under age 59 1/2, the penalty for early withdrawal is 10% under IRS tax codes (an additional 2 1/2% for California residents). These penalties are on top of any income tax events.

However, there is a way to withdraw from qualified accounts without incurring those penalties. It is under IRC Section 72(t). Contact me and we can go over how this tax code may provide you some relief. There are also annuity products out there that offer you bonuses of up to 15%, as well as guarantee you an income for life. In this market environment, they provide tremendous advantages in safety of principal, income, and growth.

Fidelity Investments

Fidelity, the world's largest mutual fund in terms of assets, loaded up on shares of Citigroup, JP Morgan Chase, and Wells Fargo--in the 4th quarter of 2008. Shares of all 3 have tanked since then, which means investors and savers of 401K's and IRA's should be questioning: what the hell were they thinking?

Those who thought last quarter's precipitous market decline offered a good entry point have been proven wrong. In other words, what seems cheap can get a lot cheaper.

Meanwhile, many workers are being laid off, straining their qualified retirement savings plans even further. For those with liquidity issues, they should look into Rule 72T if they need to dip into their 401K's without incurring the 10% early withdrawal penalty.

401K, IRA--or not?

1) 401K's are good, but not great. If the company matches your contribution, that's a good thing, but I would not contribute more than that.

2) The reason why a 401K is merely good is due to its deferred tax status. You get a small tax break during the contribution phase, but you get clobbered with income taxes during your harvest years.

3) Roth IRA's are better than a standard IRA, but a Roth comes with restrictions and most high-income individuals don't qualify. So it's better than good, but it is not best (the tax-free harvest makes it better than a regular IRA).

4) Indexed funds are better than MOST managed funds, but there are hidden costs when indices get re-balanced. It's still better than most managed funds due to lower fees and better performance. Better yet, there are vehicles linked to the indices, but not investments IN the indices. Hence, they also provide downside protection. This is huge. And oh, btw, they also allow tax-favored accumulation and access.

5) Perhaps small cap funds have outperformed large cap funds, but that depends on the time window, and small caps are historically more volatile. That is not a good fit for older investors. Most of my clients aren't 25, because most 25 year olds have no assets.

6) Risk is a relative value, and there are efficient ways for diversification and risk mitigation.

7) Dollar cost averaging only works if there is a general uptrend or steady state. If you had dollar cost averaged into the Great Depression, you would have had to wait until the mid 1950's to get back to even. If you had dollar cost averaged into the tech bust, you may never get back to even.

8) There are many geniuses who are financially misguided. The first thing I would ask a finance professor is how much is their net worth and how did they achieve it.

9) I advise people to contribute to a 401K only to the level the company matches, as they are basically paying for the taxes you will owe during the distribution phase (retirement). Deferring taxes only means postponing taxable events when your portfolio will be worth more--the government set it up so that they get to take a bigger slice of your accumulated values. In this scenario, a typical American worker gets a $60,000 tax break during their contribution phase, and gets taxed $800,000 during the distribution phase (retirement). And if their estate plan is poorly structured, their non-spousal heirs get taxed another 72% upon death. That is, of course, unless they die exactly in the year 2010. After 2010, the exemptions from estate taxes revert back to pre-2001 levels.

There are a select few who stack the odds in their favor, looking for high reward/risk opportunities.

The younger you are (or the more you earn), the bigger the potential mistake. Think about it--compounding is great if it works in your favor. When it works against you, it is crushing.