401k benefits

Preservation of Tax Advantages

Just like your 401k or IRA, rolling over you funds into an annuity will maintain the same tax advantages that you currently enjoy. Your investment will still grow tax deferred and you can still contribute on a tax free basis.

Less Restrictions

The benefits of a 401k or IRA are great, but let’s face it; the IRS puts a pretty tight lid on how you can access your money and has strict limits on how much you can contribute in a given year.  If you decide to roll over your funds into an annuity, some of those restrictions are lifted.  First off, you can contribute as much as you want to the account in a given year, there is no limit.  This can be very beneficial if you are getting closer to retirement and feel as if you need to catch up in saving.  In addition, if you need access to your money before 59 ½, companies usually allow either a 10% withdrawal option of your entire account value in a given year, or all of the gains, without any penalty.

401k investing

 Access to Greater Investment Options

Let me ask you a few questions.  How much experience do you have investing?  How much time do you spend choosing where to invest your money?  How much is this time worth to you?  Do you think you can outperform someone who does this for a living every day, all day long, and has decades of experience?  If you are like the majority of people who work for a living you do not want to spend your free time researching and analyzing the market.

Instead of guessing on how to invest, why not let a seasoned professional assist you, or manage the investment entirely?  If a client chooses to do so, a professional money manager will select and manage your investment for you.  He will be the one who monitors the investment and chooses the mutual funds.  We will take into account your risk tolerance and investment objectives, then structure a plan to help suite your needs.  As time goes on, so do fluctuations in the market.  Money managers will keep your portfolio up to date and make sure that you are getting the most out of your investment.

Guessing in the market is essentially gambling and not the optimal way to go about building a solid portfolio.  This is supposed to be money for your future, so let’s be smart about it.

Diversification & Automatic Asset Reallocation

If you ask someone who has a lot of investment experience what are the most important factors for success, they will tell you 3 things: time in the market, diversification, and asset allocation.

Diversification speaks for itself, you don’t want all your eggs in one basket, but it is a much more complicated thing to do than most people realize.  With the help of an experienced advisor, you can learn more about this process and begin to invest your money in a much more safe and efficient way.

A good company will allow their clients to have the assets in their investment automatically reallocated periodically.  Well, what does this mean?  As you invest in the market, you will have your money split into different asset categories, typically equity and bonds.  The more equity you have, the more aggressive the portfolio is.  Respectively, the more bonds you have, the more conservative the portfolio.  When analyzing your risk tolerance, a ratio of these two categories will be formed depending on your time horizon, economic situation, and overall preference on how you want to invest your money.

Undoubtedly over time this ratio becomes unbalanced and will be different from when you started.  If one asset class outperforms or underperforms the other, your ratio will become distorted and your investment objective falls off track.  The ratio should always stay balanced so your money is being invested the way it was meant to be.

investment portfolio

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Premium Based Fee Structure

Although we hate to pay them, fees are unavoidable in the world of investing.  When choosing an investment many people overlook the annual fees which can be a huge mistake, as they can be devastating to the overall performance of your investment.  In the end it’s about what you NET, not how much GAINS you had.  Traditional fees are usually based on the value of your account.  For example, if the fees associated with your current investment are 2% of the account value, then you are paying 2% of the total value of your account to invest in that vehicle every year.  With this “traditional” fee structure, the amount of money an individual pays in fees increases as their investment increases.  Let’s say your investment starts at $100,000, in this example your fees will start at $2,000.  Now let’s say the investment doubles to $200,000.   You are now paying $4,000 in fees.

An investor should have options on how they would like to be charged.  Along with the traditional fee structure, some companies also offer the option to calculate fees based on the initial investment amount.  To better illustrate this let’s look at someone who rolls over a 401K that has a current value of $100,000 and the fee to manage that account is again, 2%.  If this individual decides to utilize the premium based fee structure, the fees that they will pay each year are based on that initial investment (which would equal $2,000) and will not change throughout the years.  Therefore, as the account increases in value they are still paying the same amount in fees, essentially paying less and less of a percentage annually.  Again let’s say the account doubles to $200,000.  This individual is still paying $2,000 in annual fees and that initial 2% charge has shrunk to 1%.

Premium Bonus

Based on your initial investment, most companies will give you a bonus credit similar to those offered by mutual funds.  It depends on the amount that you want to invest, but some bonuses can be very large.

 Optional Riders

You insure your house, you insure your car, and you insure your health.  Why are you not insuring your retirement?  Some companies have an option that can guarantee against the loss of your investment.  If you are like most, you have seen your investments hit hard with the recent recession.  In these unsure times guarantees are more valuable than ever, and they are available.

With theses riders a “floor” is set under your investment that protects against market declines.  If your account declines and is below the “floor”, the company will restore your investment to its original amount after a certain period of time.

In addition, if your account increases in value the client has the option to reset this “floor” and lock in these new gains.  This also resets the period in which you have to wait to utilize the rider.

An Income Stream for Life

With an annuity there are two phases, the accumulation phase and the distribution phase.  The accumulation phase is the stage of the investment in which money is accumulated.  But what happens when an individual wants to turn that money into an income in retirement.  With an annuity, this person can turn the value of their investment into an income stream for life.  This is called annuitizing; the insurance company takes your investment and pays you back, with interest, even if you outlive the value of your account.  The paychecks will keep coming until the day you die.

There are many options on how you can annuitize, and discussing this with an advisor is very important.  People use annuities because it is the only way to guarantee against the possible outcome of outliving living their money.  We are all living longer today, that’s a fact, and the number one fear of people retiring is running out of money.

Maybe this doesn’t sound good to you.  You don’t want to give up your investment just to be paid back.  That’s fine, you do not have to annuitize, it’s just an option.  You can annuitize some, all, or none of your investment if you wish.

By Michael Brown
Retirement planning expert and rollover IRA to gold adviser.

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How to understand your 401k Plan

On your retirement plan document, under Investment performance or investment choices it will list all your funds names and the type. The type will tell options like: money market, bonds, target retirement date, large cap, mid cap, small cap and international which is emerging markets.

There will be categories like:

Value:  They invest in companies which it determines to be underpriced by fundamental measures. Often mature companies that have stopped growing but have consistent earnings.

Growth: A mutual fund that will focus on companies that are experiencing significant earnings or revenue growth. These funds are based on potential.

Blend: This is when that mutual fund has a combination of both types of companies.

  1.  Your retirement plan options could have examples like this:
  2.  Small Cap Value, Small Cap Growth or Small Cap Blend
  3.  Mid Cap Value, Mid Cap Growth or Mid Cap Blend
  4.  Large Cap Value, Large Cap Growth or Large Cap Blend
  5.  International Equity or Emerging Markets – They invest in small, medium and large companies in different countries.

401k investment

To determine which small, mid, large and international fund to have, compare the 1, 3, 5 and 10 year performance to see which fund has done better. By clicking on that fund, it will tell you the expenses. Never pick a fund that charges a front end load. This is when it cost you every time you contribute to that fund. Consider the expenses in your evaluation.

Once you have the final four funds to invest in is when you can make each 25% to get the 100% invested balance. When 401k investing, there is no right or wrong. It comes down to what you understand and believe to be the best thing for you. If you are an aggresive investor then you could pick one or two funds that are doing the best in the 1 year performance regardless of type and always maintain that strategy every 6 to 12 months.

Emerging Markets and 401k investments

Learn how to open a gold retirement account.

Mutual funds like money market and bonds are used when the market is declining. Their performance is always low and stable. Money market funds decline less than bond funds when the stock market collapses. Other funds like the retirement target date funds that say 2030, 2040 and 2050 are meant for when you planning on retiring near or at that year.

The negative on retirement date funds is when the market rises, they will perform less then the four basic types. They are fixed to have a certain amount of growth and stable stocks. As you get closer to that retirement year, those funds will have less growth stocks and more stable stocks that don’t earn a higher percentage. They are set that way for safety reasons but you miss out on earning more when the market rises as you see from the chart on the Home page.

The above information will give you a good guide line to your 401k. Once you read everything again from the first page and then get on your 401k website, it should all come together for you.

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By Michael Brown
Retirement planning expert and rollover IRA to gold adviser.

What is a 401k?

The Internal Revenue Code was amended by Congress in 1978. Among the changes made was the addition of section 401(k), which dealt with the establishment of programs that would help with the retirement of business executives.

However, it soon became apparent that the type of retirement fund that had been developed was even better suited to workers. This was largely due to the fact that its contribution limits were far above those of Individual Retirement Accounts (IRA). It also allowed for employer contributions that matched at least some part of the employee contribution.

 What is a 401k Plan?

Most standard pension plans are limited by highly structured payments and the inability to choose different investment types. The Internal Revenue Code, in section 401k provides for a program that gives retirement benefits with much better flexibility.

401k plans allow you to put tax-defferred funds from every paycheck into an investment of your choice, under the supervision of your employer. Not only can you choose how your money will be increased over the years, but you can potentially increase the final yield. The investment options for 401k plans are numerous, ranging from mutual funds to bonds to money market funds. You also have the option to change your investment at any point during the life of the 401k plan.

Eligibility for a 401k Retirement Fund

What is the Eligibility for a 401k Retirement Fund?

For the exact information that pertains to your company’s 401k plan and your eligibility, you should contact the administrator of your plan or the appropriate official within your workplace that can provide you with a Summary Plan Description (SPD). However, there are basic guidelines that all 401k plans will invariably follow.

Company Employment

You must be employed by a company that actually offers 401k Retirement Plans. Even if you are able to afford contributions and desire to invest in your retirement, you must be working for a business in the 401k program or you cannot invest in it.

Employment Period

Depending upon your company, the time period will be different. What is not different is the fact that you will not be able to being investing in a 401k plan upon the beginning of your employment. The period will not exceed one year.

Age

Even if you are in the upper level of management or have enough money to contribute enough of your paycheck consistently, you must be 21 years of age to be eligible.

401k Investment Opportunities

What kind of 401k Investment Opportunities Exist?

It is important to keep in mind that each type of investment has its own degree of certainty and uncertainty. Since all investments perform differently, one way to manage risks is to diversify your portfolio by investing in a blend of different types of assets.

Aggressive Growth Funds are comprised of stocks with greater-than-average potential for growth. Such stocks might include start-up companies, smaller companies, or companies in high-risk industries.

Balanced Funds are also known as Life Style Funds or Asset Allocation Funds. Blending both stocks and bonds; these funds allow diversification with potentially lower risk.

Bonds Funds represent loans to Federal or local governments or to a corporation, with a promise to repay at a set interest rate at a predetermined amount of time.

Growth and Income Funds invest in companies with strong growth potential that also have a solid record of paying dividends (income).

Growth Funds investing in relatively stable and established companies, which may or may not pay dividends. These funds try to identify companies whose stock values are expected to increase.

International or Global Equity Funds invest in stocks outside the United States. While Global Equity Funds invest in both foreign and U.S. companies.

Money Market Funds typically consist of U.S. Treasury Bills, Certificates of Deposit (CD‘s), and other commercial investments.

Mutual Funds pool money from many investors and can invest it in various securities such as stocks, bonds, and money market instruments, and are designed to help reduce, but not eliminate, risk.

Stable Value Funds are designed to provide consistent, predictable growth over the long term. Sometimes referred to as the “fixed fund” or “guaranteed fund,” these funds are typically backed by contracts issued by insurance companies. This option is generally considered low risk. Company Stock- By selecting your employer’s stock you acquire an ownership interest in the company.

Stock Index Funds attempt to “mirror” the performance of the stock market indexes, such as the S&P 500.

401K Plan Advantages
gold ira retirement plan

401K Plan Advantages

Employee Contribution

When an employee enters into a 401k Retirement Plan, it is up to them to decide how much money they put into their investment.

Tax-Deferred Earnings

Any taxes that are to be paid upon money made from 401k investments are assessed after interest has been accrued. This means that the interest and growth on your investment is made with more money in your account than if taxes were pad when money was first invested.

Investment Options

People paying money into their 401k can regularly change and modify their investments with many different types of funds, such as mutual funds, bonds, and stocks.

Rolling Over 401k

You can easily move or “roll-over” your 401k Retirement Plan to another job and another type of investment when you go to another place of employment.

Matching Funds

Many employers will choose, as a 401k incentive to contribute some amount of money to your Retirement plan every time that you do so.

 

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By Michael Brown
Retirement planning expert and rollover IRA to gold adviser.

IRA Definitions

Individual Retirement Accounts (IRAs)
The problems that exist today which threaten the financial security of retired Americans face the self-employed as much as they do those who work in a company. However, 401k plans are available only to those who work in a company that actually participates in the 401k program. The only real alternative is an Individual Retirement Account (IRA). Sponsored by the U.S. government, it functions in a very similar manner to a 401k Retirement Plan. However, it is available to any American with enough money to contribute, as well as being subject to a few other eligibility rules.

401k rollover to IRA

gold retirement

IRA Eligibility
You can set up an IRA if you have any income at all or money that is reported on your W-2 statement. Essentially, if you worked and were paid for it you can have an IRA, and it does not matter if you were paid $100 dollars or $100 million last year. The Internal Revenue Service (IRS) allows you to contribute up to $2,000 of your earned income (or the amount you earned if it is less than $2,000) into an IRA, as long as you are under age 70s.

Types of IRAs
Keough Pension Plans
Keough Pension Plans are similar to traditional IRA’s. However, the difference between them is that Keough Plans are divided into two groups: Defined Contribution Plans and Defined Benefit Plans. These two plans allow a much greater contribution on the part of the employee.

Defined Contribution Plan:
Defined Contribution Plans allow an employee to add up to $30,000 a year, or 20% of their income into an IRA fund. However, the level of contribution cannot be changed or altered and remains constant throughout its entire duration.

Defined Benefit Plan:
Defined Benefit Plans allow a large annual contribution, but differently than Defined Contribution Plans their funds are calculated differently. Rather than setting a contribution and making it regular and constant throughout the life of the plan, a benefit goal is chosen. Contributions are then assessed, with the help of an accountant or financial professional, on a regular basis to determine what is necessary to achieve the goal and what is available to contribute.

Roth IRA
Roth IRA’s are very similar to traditional IRA’s in that they allow for contributions from the income of an employee to fund a retirement investment. However, rather than being tax-deferred, contributions are made after taxes have been paid. This precludes pre-tax growth with more interest growing from more money, but once benefits are paid out upon retirement, no income is due on them.

Simple IRA
Savings Incentive Match Plans for Employees (Simple) IRA’s are a way for smaller businesses to offer retirement plans to their employees in a way that they might not be able to. Very similar to 401k Retirement Plans but applying to businesses that have 100 employees or less, it allows workers to contribute tax-deferred income into a fund to be invested and developed for retirement.

Spousal IRA
If you or your spouse does not work or has an income less than $2,000, it might be difficult to provide for retirement. Spousal IRA’s allow for a retirement fund that can be paid for by an individual’s spouse should an individual not be able to afford contributions.

412(i) Plans
412i plans operate similarly to 401k plans. However, they are ideal for small businesses that seek to provide retirement funds to their employees when numbered six or fewer. Contributions are tax-deferred funds from income, and unlike 401k plans or other retirement funds, benefits can be cashed out upon retirement in a lump sum rather than being spread out in many payments.

Traditional IRAs vs. Roth IRAs
Eligibility
Traditional IRA’s require only that you have an income and that you are under the age of 70 and one half. Roth IRA’s demand an income of under $110,000 if you are single, and under $160,000 combined for a married couple.

Contribution
The maximum contribution for both Roth and Traditional IRA’s is $2,000. If your entire income is less than $2,000, you may invest it all.

Deductibility
While Roth IRA’s are not tax-deductible at all, if your employer does not offer any retirement plan at all, including a 401k Retirement Plan, you may write off your Traditional IRA contributions as tax-deductible.

Tax Advantages of Contributions
The advantages of Traditional IRA’s in terms of tax benefits is that you can usually write off your payments. Also, by contributing tax-deferred money, you will have more money in your fund earlier that will grow greater interest. Roth IRA’s, while you can only contribute income that has already been taxed, will not require additional taxes when you actually withdraw your money.

Tax Penalties
While there are certain exceptions, there will be a 10% excise tax penalty against you if you remove money from your IRA of any type before age 59 and one half. If you hold your money from a Roth IRA and do not use it in any way for five years, you will not be penalized.

Required Distributions
Traditional IRA’s require that distribution begins no later than the point a which you turn 70 and one half years old. Roth IRA’s can begin distribution any time after age 59 and one half.

By Michael Brown
Retirement planning expert and rollover IRA to gold adviser.

Don’t Gamble With Your Retirement
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Gold IRA Investing, Is It Right For You?

Preparing for our financial futures can be a pretty intimidating process.  There are many different options to consider when deciding to invest funds into an Individual Retirement Account (IRA).

There are various types of IRAs, each with their own qualifications.  You should meet with your financial adviser to find out which one works best for you.  In this article you will be introduced to gold IRA investing.  This is the practice of investing a portion of your funds into precious metals.

Since the passage of the Taxpayer Relief Act of 1997, the federal government has allowed owners of IRAs to invest in precious metals, such as gold, silver, and platinum.  Gold IRA investing has become very popular over the past ten years due to the fact that the price of gold has consistently risen during a time that stock prices became very unstable.

gold ira retirement planning

Many financial advisers have steered their clients toward gold as a hedge to protect their investments.  We have seen the economy decline, led by the real estate markets, over the past decade.  The price of precious metals has escalated over the same period of time, particularly that of gold.  This has caused a greater demand for gold, which in turn has led to additional increases in the value of gold.

Gold can be added to any IRA in the form of bars or coins.  Per IRS regulations, the precious metals cannot be held in the physical possession of the owners.  They are required to be held in a depository that has been approved by the IRS, such as the Delaware Depository Service Co. located in Wilmington, Delaware.

Here are some tips to consider once you’ve made the decision to include gold in your investment portfolio.  Gold coins must be determined to be 99.5% pure in order to be included in an IRS-approved retirement account and they must be classified as legal tender.  Some coins that meet the criteria are the Canadian Gold Maple Leaf, the American Gold Eagle, and the Austrian Philharmonics.  These are just a few of the qualifying coins.  Your adviser can direct you to more.

Also, account holders can chose between gold coins, gold bullion, and gold stock (normally stock  from mining companies that mine gold). Gold coins tend to be the most stable, while stock tends to be significantly more risky.  There is always some risk involved in all investment transactions.  You should seek the advice of a qualified accountant or tax professional prior to making any decisions of which form to invest in.

So how do you get started with gold IRA investing? The first step is to meet with your financial professional to decide which type of account you will qualify for.  You will then need to fund the account.  There are several options for doing this including: transfer of funds from another account, direct roll-over, or cash infusion.  The final step is to start investing in gold, or other precious metal. This may sound like an over-simplification, however it actually is this easy.

Experts on gold ira retirement planning are available to assist you with your decision making process.  You will have many questions you will want to ask, and it’s very important that you get fully informed.  Which accounts qualify for investing in precious metal?  How do you maintain your desired tax status?  How do you process a roll-over of funds from one account to another?  An expert in gold IRAs can answer these questions and help you assess your needs. Out of all the firms out there, we like Regal Assets the best. They have a very good BBB rating, guaranteed 7 day delivery and a very complete free investment kit to get you started.

Many people have already discovered the benefits of precious metals IRA investments and have found security for their financial futures.  It’s never too late to start investing in your future, but every day you wait is money that won’t be growing and adding to your retirement funds. Waiting too long could mean the difference between “just getting by” in your retirement, and living comfortably.

By Michael Brown
Retirement planning expert and rollover IRA to gold adviser.