Letter Re: Reinvesting a 401(k) Into Precious Metals

Mr. Rawles,
Congratulations on the success of your website. I follow it everyday and have gleaned much info from it. My wife and I have been working at getting our “beans, bullets and band-aids” together and have made what we believe is good progress. With the state the economy is in and considering your advice about investing, I have a question that I hope you can/will help me with. I am thinking about taking out a loan against my 401K to: 1) Pay off our home @ approximately $18,000; 2) Round out our “beans, bullets and band-aids” and 3) Invest in 2-3 bags of pre-1965 silver coins. To my way of thinking (which may be skewed) this would be a way of re-investing a portion of my 401K in tangibles instead of paper. I would appreciate any advice that you would be willing to give. Thank you for your hard work and for sharing your knowledge and insight. – Steve

JWR Replies: I’d recommend that you keep your investments diverse. Diversifying some of your retirement money into precious metals is wise. Paying off your home early only makes sense if the interest rate that you are paying on your mortgage is higher than the rate of return you are earning on your 401(k).

If like me you have no faith in the long term prospects or the value of the dollar, American Church Trust offers gold coin deposit self-directed IRA accounts. (The folks at Swiss America can help you set one up.) Under some circumstances a 401(k) can be rolled over into an IRA. Parenthetically, when I was with Oracle Corporation back in 1999, my co-workers thought that I was crazy putting money in a gold IRA rather than Oracle stock. (“Jim, you are missing out. Oracle shares are going to the moon!”, they said.) That was when gold was under $325 per ounce. And where are gold and Oracle shares now, respectively?