Obviously, as citizens or residents of the United States of America, retirement planning/saving account is cogent issues towards maximizing your financial future/security to fullest. And investment in gold bullion is the safe haven through the mechanism of utilizing proceeds of the 401k.
This might be a strategic or challenging decision for young employees/graduates but a watchword for them is to keep their “credit life” (Credit Cards) very low and make provisions for the “rainy day” by signup to their employer’s 401K.
Bolts and Knots of 401K
401K is retirement savings/investment account whereby the employees set aside certain part of the monthly salary before tax. Majority of the employers have this package or corresponding equivalents for their employees for the purpose of enhancing long term savings.
Almost every contract have the pros and cons, 401K also is not exempted. The identifiable merits of 401K are highlighted below;
1. Deferred taxation. The contribution from your salary towards the 401K is deducted at source before taxation. Therefore, it is tax-free at the time of contribution but the tax applicability is deferred to later years when you are cashing out of the system.
2. Reduction in taxable income. Sequel to number one above, because your contribution is not taxable, the tax payable by you is based on the balance of your salary after the deduction for 401K. This has drastically reduced your taxable income and tax paid on weekly/monthly basis as the case may be.
3. Matching contribution. The 401K is a saving towards your retirement and your employer also supposed to be part of that contribution. Some employers that recognized the importance of retirement provisions for their employees offered a matching contribution, which is a specified percentage added to the contribution of the employees.
4. Long term savings/investment. This retirement savings can be for several years (long term), take for instance an employee that join the service of the employer at age 20 can have the opportunity of contributing until retirement age (60 years). That means his/her contribution is for a period of 40years, thus having a huge accumulation of fund at retirement.
5. Compounded ROI. The returns on investment is compounded and this will enhanced the speedy growth of the accumulated fund over years.
The opposite of the above are the drawbacks of 401K retirement planning as specified below.
i. Limited investment opportunities. You only have the option of choosing investment opportunity among those provided by scheme in-house or managed by advisory.
ii. High operational expenses. The professional fees and other expenses in managing the scheme is usually high compare with the individual retirement account (IRA).
iii. Pre-retirement cash-out penalties. Early cash-out from the scheme will merit a penalty being a specified percentage as stated by the terms and conditions of the investment portfolio.
Now, having discussed extensively about the advantages and disadvantages of 401K, the question is how do l utilized my 401K retirement savings.
Utilization of 401K retirement fund
Sincerely, you have various options at your disposal ranging from company stock to index fund, bond, “target date” retirement fund etc.
To this end, the simplest course of action is to pinpoint the lowest cost and most diversified investment fund that take cognizance of gold bullion as part of the investment combo.
You can also read other publications on this blog that specified the importance/reasons why gold bullion must be part of your investment portfolio.