Need some advice about investing

[donnygamble]

As I grow older I find myself focusing more on how I intend to prepare for my retirement. The reality is that Social Security is a fantastic pyramid scheme, even if it is legal because the government has created it. Regardless, I know that if I intend to so more than simply survive, I must prepare for my retirement.

This has left me looking at different investment vehicles such as an IRA or 401(k) in order to prepare for my retirement. I have long believed investing in precious metals and gems to be a powerful investment vehicle. I found on wikipedia at Self-directed IRA - Wikipedia, the free encyclopedia that it is legal to invest in gold and other precious metals in relation to an IRA. This obviously excites me for a number of reasons.

Typical investment vehicles use the stock market for their investments. The past decade or so has proven that these vehicles depend more on luck than anything. My wife had a nice fund stored in her 401(k) only to lose over half of it in less than a week back in 2008 when everything took a turn for the worst. After discussing things with her adviser we learned it could take more than 10 years just to recover what she lost let alone move forward.

I have no doubt that countless people have been in the same place we were when this happened. After watching the value of gold and other precious metals consistently climb, I decided it was time to find a way to use that momentum to invest for our retirement instead of counting on the stock market or social security.

I was looking for some guidance and advice from people to see what all of you have to say about this. I found some awesome information about investing in precious metals and other awesome information about the legal aspects of an IRA and a 401(k) and precious metals.

But I am obviously very hesitant to just throw money at the wall considering our loss with our 401(k) in the past. Before I make any decisions or place my money in anything, I want to take the time to do my research. So here are some questions I have that hopefully some of you can help me with.

1. Do you have any personal experience with any investment companies and if so, what companies have you worked with that are worth their weight in gold, so to speak.
2. I know that an IRA only allows for a certain amount to be invested every year while a 401(k) is virtually limitless in how much can be placed in the account each year. Do you recommend one vehicle over the other and why?
3. Do you know what the advantages are for investing in one compared to the other in relation to precious metals?
4. What are some of the disadvantages of investing in one compared to the other?

I have done some research and learned a lot, but I really want some advice from people who have walked the walk and talked the talk. I trust most of what I have learned online, but many times it can be challenging to know what and who to trust. I know I can count on those of you here who have actually done it yourselves to share good, useful, and valuable information compared to a website who has the goal of converting me into a sale and a commission.

 

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[TheCoinKid]

I can't comment specifically on investing in PMs via retirement accounts; That's something I have no experience with.

Regarding some of the other matters you touched upon, I'll address what I can.

The advantages of an 401(k) vs. an IRA:

A 401(k) is a pre-tax retirement vehicle, offered by an employer. There are limits on what you can invest annually, but you will need a 6 figure salary to reach these limits. One great benefit to a 401(k) is that your employer will generally contribute an amount equal to a % of your salary (employer contribution) each year, which will typically vest over a 5 year period (the vesting term and amount of employer contribution varies by employer). Additionally, you can early-access your 401(k) account by loan, if needed. All 401(k) plans I've been associated with (and I've served as a director of a corporate 401(k) committee in a prior life) will designate 5-10 options to allocate contributions to (company stock, stock and bond mutual funds, cash investments, etc.) I've never seen one that would allow you to invest in hard asset PMs, but I would guess certain PM funds and ETFs are available in some plans. Once you leave your employer, a 401(k) can be moved into a rollover IRA account.

An IRA (traditional-Pretax or Roth-aftertax) has lower limits for contributions, but the investment options are far greater and I understand that you can hold hard PMs in these.

Regarding your wife's experience in 2008, I hope she didn't sell her stock investments when the market dropped. I also experienced a similar drop in value at that time, but held on to my stock investments. Today, they're worth significantly more than BEFORE the 2008 crash - far quicker recovery than the 10 years suggested to you. Market timing (trying to buy or sell, based on expected short-term market swings) should be left up to the professional with a high tolerance for risk.

I do have some experience in investing in PMs. Currently I hold various types of US and foreign govt. issued coinage (Eagles, Pandas, US 90% silver coins, etc), but have previously been as extreme as investing in South Africa gold company ADRs (back in the 80's, when there was much civil unrest in the country).

For what it's worth, my suggestion would be to maintain a balanced portfolio of stocks, bonds, cash and hard assets (PM's, real estate, etc.). I don’t know anyone that can accurately predict how any investment will perform long-term. Looking at price charts, the long-term trend in stocks is up (in fact, most indicies are near record highs), but we've all seen the large unnerving declines, too; The Long-term PM trends are also up, but they’re much, much more volatile (silver was near $50/oz in 1980, around $5 for much of the 90's and early 2000s, then back up to near $50, and now resides at around $20).

In general, this board seems to have a bias (relative to the general population) against stock market and most other financial investments, and is decidedly pro PMs (that's why they gather here). Absorb all of the information you can and make your own judgments. Find an unbiased (usually means independent) financial advisor to help guide you. If SHTF, as some doomsday preppers are predicting, will precious metals really be the answer? I personally doubt it, but I do think they have a place in a balanced investment philosophy.

Doesn't directly answer your questions, but it's my 2 cents worth, anyway.

 

[skeeterd]

Coinkid gave some great advice. I'll add that diversifying is important in your retirement investments. If one of your investments crashes, you will have others to back it up.

 

[Gold Maven]

Start a 401k as early as you can in your career, it makes a big difference at retirement.

Also something I didn't know, as this last recession started, I lost 20% of my 401 in less than a year. I was worried, called my 401 guy and he said, yeah we should probably pull it out of the stock market and put it some where safe.

I found out later this was a big mistake, when the market drops, your value drops, but you still have the shares, and you are still buying shares at a much reduced rate. When the market comes back, your value will zoom.

I like the Suze Orman show, she seems to have sound financial advice. GL.

 

[smokeythecat]

All I had was some small Social Security coming and my house was less than ten years from being paid off and come collectibles which could be sold. I had just a few thousand in my 401k but trashed it to pay for my mother's funeral. That actually worked out pretty good. Fifth commandment and all that. Anyway, a few years later, lost my job, got a better paying job which I still have then lost my uncle and brother in the same year and all of a sudden I had a fairly decent IRA and another house. Spent a fortune to fix it up over 6 months, and now it's rented, so now I have another asset and a rental income. Which gets taxed mightily I might add!

First I hope your wife didn't sell what was in the retirement account. It should be on the rebound. I have some small amounts invested in gold stock (GLD on the DOW). I've lost a little on it, it will probably still drop. So I have real estate, Social Security in a few years, and an IRA. When I got the IRA I also kept the financial advisor who had been managing it.

My best advice is to get an advisor and research EVERYTHING they advise you to buy. Be prepared to say no to a buy option. Risky investments pay the most interest or dividend because of the risks involved. I'm doing ok. I would not buy a municipal bond right now if it was the only investment vehicle out there. I also would not buy gold or silver right now.

Several key things to remember: Foreign investments can be a good way to lose a lot of money. If you have a house, that is probably your best investment, keep it well maintained and put away money for future taxes. Put some after tax money in an old fashioned savings account or a CD, depending on how much you have.

What everyone forgets is when you finally take money OUT of the IRA or 401K, you'll give the government (Fed and State) about 25% of it. So if you have $1 million, $250 isn't really yours. Stinks, but that's the law, so put some cash away that is not subject to withholding taxes like an IRA or 401k would be.