Don't be like this guy

Congratulations! You made the choice to rollover your 401K! The last thing you want is to lose more than half of it to taxes. Watch out for these pitfalls:

1. The Same Property Rule – If you take a rollover distribution from your 401K in a certain asset class, you need to reinvest into the new retirement vehicle the same amount and type of asset. For example, if your 401K is distributed to you in cash, you must roll cash into the new account. You cannot take the cash and buy a mutual fund and then put the fund shares in the IRA.
2. The 60 Day rule – Once you take the rollover distribution, you have only 60-days to invest that money in a qualified retirement account. If you miss this deadline, the IRS will be at your door. 60 days may seem like a lot of time, but the Employee Benefits Research Institute reports that 60% of people who take an early distribution do not get it into another qualified account within the time limit.
3. The 12-Month Rule – You are only allowed to do one rollover from or to an IRA within a twelve month period. The exception to the rule is a conversion from a traditional IRA to a Roth IRA.

A 401K Rollover can be complicated to do on your own, especially as most Americans will only have to do it once or twice in their lives. You may want to check out our information on IRAs and 401Ks. Many people don’t even realized that they can own a gold IRA.

Are you leaving your job? One loose end to tie up is handling your 401K. You generally have three options.

• Cashing out – take the money and run. Or more likely, cash out and possibly be penalized by taxes and fees. If you are under 59 1/2, the penalty alone will be 10% of the total.
• Let it sit. Some people even forget they have old 401Ks! If you do let it sit, log in every year and readjust your fund allocations so that your level of risk and exposure is balanced to your comfort level.
• Roll it over into an IRA. This is probably your best option!

IRAs have many, many advantages to 401Ks. For example, in a 401K your investment opportunities are extremely limited. You may only be allowed to invest in a select number of funds, and even then there are tons of hidden fees.

With an IRA you can have the security of a precious metals in your retirement account. You can invest in stocks, cash, mutual funds, gold, and even real estate in an IRA. Gold in an IRA is one of the best ways to prepare for retirement by providing you a safe inflation hedge as well as high returns. You can’t hold gold in a 401K but you can in an IRA.

IRAs have more relaxed withdrawl rules for both emergencies and major financial decisions than a 401K would. For example, a first time home buyer can take a withdrawal to put towards the cost of a down payment from their IRA without penalties (there could be some tax payments involved, consult your accountant if you’re considering this), but 401Ks do not offer the same advantages.

Fidelity released a report that the average 401K has rebounded several thousand dollars from this time last year. However, the LA Times points out that the average is still 13.3% below the peak reached in 2007.

Although financial markets have rebounded sharply this year, the Fidelity figure doesn’t mean that the investments in the typical account more than recouped what was lost in the meltdown. The totals include all employee and employer contributions to the accounts, so the money coming in would have offset some of the prior losses.

Now, when even President Obama is warning of a double-dip recession, are you willing to take another chance with your 401K in the market? Gold has gained 29% this year while investors are still struggling to recoup their losses in the stock market and mutual funds. Look into a gold IRA or gold 401K today!

All the big boys are throwing shoes at the 401K this week! Below find links to the articles with our favorite quotes. Notice that comprehensive diversification, which involves precious metals, is not really addressed by the critics. They bemoan the fact that a perfect balance of stocks and bonds can never be achieved, and fail to look around at the powerful returns investors all around the country are seeing with a gold 401K.Gold performs well as a safe-haven in times just like the one we are experiencing.

Time Magazine published Why It’s Time to Retire the 401K which looks at both economic reports and personal struggles occurring around the country.

-“The ugly truth, though, is that the 401(k) is a lousy idea, a financial flop, a rotten repository for our retirement reserves.”

-“More than a quarter of all 401(k)s were 100% stocks, exposing those accounts to big losses when the market dropped.”

-“Trying to boost returns by adding stocks can make matters worse. Even if you withdraw a mere 4% a year from your 401(k) and have an ultraconservative portfolio of 80% bonds and 20% stocks, you still have a chance of outliving your retirement account. Swap the bonds for stocks, and the chance of outliving your money actually rises.”

The New York Times editorial About Your 401K suggests restructuring tax incentives to solve the 401K’s inherent problems.

- “As a result of risks and mistakes, most American workers who are relying on 401(k)’s fail to amass anywhere near what they will need for a secure retirement.”

- “A thornier problem is that even someone who steadily contributes to a 401(k) and makes sensible investments can end up with too little — depending on whether the markets are up or down as retirement nears.”

CBS MoneyWatch’s Retire the 401K. Replace it With This. examines the problems in a 401K and suggests a new system of saving

-“With the 401(k), we have a system that sets up some generations to retire broke and others to retire rich, based entirely on whether the last years of their career fall during a boom or a bust.”