Every year, those of us who are ready to retire find ourselves facing various changes in the world of finances, forcing us to make unexpected decisions. One of the main issues we face is what we are able to do with the money that has built up in our 401K plans while we were working.
Most of us are told that we should rollover our plan and turn it into an IRA (Individual Retirement Account). However, this may not be the best option in all cases, since you have other possibilities as well.
Let’s take a look at these possibilities and what their pros and cons are.
What Are Your Options?
Let’s take a look at the options that are available to you. As with any investment plan, your personal circumstances will play the biggest role of all. Hopefully, by being aware of the options out there, you will be better equipped to make that decision.
1. The Rollover Option
The rollover option is the most common. This is because it gives you the freedom to choose your own investments. By rolling over into an IRA, you can invest in anything you like, from real estate to stocks and bonds. 401K plans tend to be quite limited in terms of what you can invest in, which makes it quite interesting to do a gold 401K rollover instead.
Another benefit of rolling over to an IRA is that your heirs will have more options in terms of having the plan paid out. As the owner of the IRA, you can withdraw money whenever you want or even liquidate it. IRAs also have greater protection from creditors, up to a limit of $1 million.
If you want to, you are able to do a straight 401K to gold IRA rollover, which is known as a self-directed IRA. This also means that when you turn 70.5, you are exempt from the RMD (Required Minimum Distribution).
2. Leave Money in the Plan
Staying in a 401K plan is restrictive, but it does offer some advantages. Mainly, you can leave your assets in one place without them being taxed.
However, you do have to consider just how limited your investment options actually are. On the other hand, if it has always performed better than other plans on the market, then there should be no reason to leave.
Additionally, your 401K is also almost fully exempt from creditors. Hence, you could declare bankruptcy with several million in your 401K, without your creditors being able to lay claim on it. Indeed, only the IRS can attach itself to the money within your 401K.
3. Convert 401K to Gold
The final option is to convert to a 401K gold account. In all of history, precious metals such as gold have held their value in a stable manner. Indeed, gold and silver were long used directly as currency.
Even our country remained on the Gold Standard until very recently, which meant that the value of the dollar was directly linked to the value of gold. Now that we have left the Gold Standard, our dollar’s value is linked to market confidence in the currency and the belief that the value depicted on the notes will actually be paid out.
This means that there is a stronger potential for a full financial crash, or hyperinflation. Precious metals, on the other hand, will always keep their value, as it is classed as “intrinsic” in value. This is because it will always be attractive to use and it will never be easy to mine or get your hands on.
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In every economic meltdown that has been experienced, investors have looked to gold in order to ensure their savings are protected. Additionally, gold has been raising in value recently. It resists inflation and becomes more valuable whenever the markets are declining.
Additionally, over the past decade or so, it has provided a very solid return. Naturally, there is always some fluctuation in value, but nothing as significant as what can happen with currency. If you decide to convert your 401K to gold, you know that you will always have significant stability, regardless of what the rest of the economy is doing.
You will always be protected against hyperinflation, meaning that you know your retirement fund will always be waiting for you. Finally, precious metals always have great returns.
Nevertheless, there are some downsides to a gold IRA. The primary one is that it can be quite expensive to run one. However, if you know how to do your research, you should be able to find a company that can manage your account in an affordable and proper manner.