Letter Re: Advice on Retirement Plans and Precious Metals IRAs

Helo Jim,
Just a note to let you know what a great job your doing with the blog. I have a question that as far as I know you have not addressed. Most of my individual retirement account (IRA) money is in a 403b at work. [A 403(b) is a tax deferred retirement plan for the employees of nonprofit organizations.] I had wanted to roll this over into a precious metals IRA. However I am not allowed to do this until I leave my current job. Is there anything you would advise that I can do to protect my 403b against the declining dollar besides cashing it out and taking the huge hit in penalties and taxes? Thanks, – Jeff in Ohio

JWR Replies: My first suggestion is that because in most cases (depending on your income) you can have both a 400 series (401/403) retirement plan and an IRA, that you go ahead and set up a gold IRA, even if the majority of your retirement funds are locked up in another plan. Just minimize your contributions to the 400 series, and maximize your contribution to your gold IRA.

Company retirement plans vary widely. Some have a narrow range of investing options, while others offer a plethora. Even if you are “trapped” in a 400 series retirement plan, then at least direct your funds that are there into low risk investments. Since the US stock market is presently over-valued and likely to decline rapidly, this not a good time to have your retirement fund weighted toward stocks or stock mutual funds. If you have the opportunity to direct your portfolio in to bonds, I would recommend doing so, at least for the next few years.

One option for folks that feel trapped in their current retirement plan is to work out an arrangement with their employer to resign and come back on board–typically after a brief vacation –as an independent contractor. This would allow you to roll your 403(b) directly into an IRA. Note, however, that you must carefully weigh the costs and benefits. If the only retirement benefit that your company provides is the 403b proceeds, then it is is probably a good idea. But if your company also provides a traditional retirement payment, then this would probably be unwise. (Since the benefits that you would earn for the rest of your life are potentially quite large.) Also, switching to independent contractor status will mean some income tax and FICA “contribution” changes and necessitate finding your own health insurance. Run all the numbers before making such a drastic change.

The many variations of IRAs go beyond the scope of this brief discussion, but be sure to research them, and find out what is best for your particular circumstances

Precious metals IRAs are available through Swiss America. I’ve had a gold IRA with them (through American Church Trust, and more recently through Goldstar Trust Company) since the late 1990s, and in the past six years it has performed very well. Since the bull market in precious metals is still in it early stages, I expect further gains in the years to come.

I generally recommend pre-1965 circulated silver coins for tangible (“at home”) holdings, but gold for precious metals IRAs. This is because the purchase premium (above the spot price) is considerably higher for silver American Eagles versus gold American Eagles.

Note: As stated in my Provisos Page, I’m not a registered investment counselor, and I don’t give compensated investing advice.