401k reallocation questions

[DevilsFan]

First timer here seeking some advice. I am contemplating a job change which will free up around $100,000 in my 401k to reallocate in some way. I'm not planning on tapping it (I'm still at least 25 years away from retirement), so don't worry about that. Instead, I'm trying to decide how to reinvest the money in either a new company 401k, a Roth IRA, or both.

One consideration is that the new company's plan is not as generous as the old company. The old company matched dollar for dollar on the first 5%. The new company only matches a quarter on the dollar for a $1000 maximum annual amount. Also, I really want to reallocate a decent percentage of my earnings into gold IRA of some sort. Can I take say 75% of my portfolio and roll it into my new 401k, then take the other 25% and open a Roth with gold as a significant portion of the portfolio? How does one go about adding gold to an IRA? If it were you, would you roll any of the funds into the new 401k, or would you take all of it and reinvest it back into Roths?

I guess I'm looking for general opinions on what to do. If I change jobs, it will be my first time in the 13 years I've worked in the business world, and I don't plan on doing it again. I want to make sure I do this right.

Thanks,
Rob

[Andreuccio]

Re: 401k reallocation questions

How does one go about adding gold to an IRA?

Try GLD, Streettracks Gold.

[Jim Nickerson]

Re: 401k reallocation questions

First timer here seeking some advice. I am contemplating a job change which will free up around $100,000 in my 401k to reallocate in some way. I'm not planning on tapping it (I'm still at least 25 years away from retirement), so don't worry about that. Instead, I'm trying to decide how to reinvest the money in either a new company 401k, a Roth IRA, or both.

One consideration is that the new company's plan is not as generous as the old company. The old company matched dollar for dollar on the first 5%. The new company only matches a quarter on the dollar for a $1000 maximum annual amount. Also, I really want to reallocate a decent percentage of my earnings into gold IRA of some sort. Can I take say 75% of my portfolio and roll it into my new 401k, then take the other 25% and open a Roth with gold as a significant portion of the portfolio? How does one go about adding gold to an IRA? If it were you, would you roll any of the funds into the new 401k, or would you take all of it and reinvest it back into Roths?

I guess I'm looking for general opinions on what to do. If I change jobs, it will be my first time in the 13 years I've worked in the business world, and I don't plan on doing it again. I want to make sure I do this right.

Thanks,
Rob

I personally would take my 401K and put it into some sort of IRA versus putting it into another company's 401K. It seems to me that one has infinite choices of investments if the money is in an IRA vs. probably fewer choices in another company's 401K. This assumes you have or will have the "expertise" to manage your own IRA.

I don't know the tax implications of putting money into a Roth if one is talking about 100K. If I worked today and if I made money and could put it into a Roth on a annual basis, I would. The only thing that bothers me about Roth's is whether or not someday our elected elete will renege and figure out a way to tax the Roth again. The notion of paying taxes on a sum of money once and then never again is rather unbelieveable, and perhaps I don't understand the Roth laws. It is my understanding that once money is in a Roth, that withdrawals are never taxable if the withdrawals occur after some stated age limit.

There is a lot written somewhere on iTulip and elsewhere about how to own gold. Even though GLD seems to be an investment in gold, it might not be. If one really wants to own gold, then bullion is the only real way to do it, and one cannot do that in IRA's as I understand.

Hopefully you will get a lot more input to your question. Also GTU is a gold fund and CEF is half gold and half silver, both of which may sell at premiums. Check http://www.etfconnect.com/select/fun....asp?MFID=3653 as a starting place.

Good luck, and be careful out there.

[Tet]

Re: 401k reallocation questions

One consideration is that the new company's plan is not as generous as the old company. The old company matched dollar for dollar on the first 5%. The new company only matches a quarter on the dollar for a $1000 maximum annual amount. Also, I really want to reallocate a decent percentage of my earnings into gold IRA of some sort. Can I take say 75% of my portfolio and roll it into my new 401k, then take the other 25% and open a Roth with gold as a significant portion of the portfolio? How does one go about adding gold to an IRA? If it were you, would you roll any of the funds into the new 401k, or would you take all of it and reinvest it back into Roths?

Does the new 401K account offer a self directed brokerage account? Not many do and if they don't I can't imagine you'll be able to buy what you want. I think I'd be leaving my money in the old IRA or roll the IRA into a different IRA that gives me more options.

[DemonD]

Re: 401k reallocation questions

My 401k actually has benefitted me more than just doing an IRA. There is a fund that is closed to investors that was open to me because I was in the 401k. The return of this fund has been 16% a year since 1984, the 3rd highest annual return for a vanguard mutual fund. The top 2 were the health care and reit funds, both also closed. And I happened to catch this fund on a downturn, and made quite a large percentage increase in it. I have since liquidated a large percentage of it expecting the market to drop sometime in the very near future.

[DevilsFan]

Re: 401k reallocation questions

Does the new 401K account offer a self directed brokerage account? Not many do and if they don't I can't imagine you'll be able to buy what you want. I think I'd be leaving my money in the old IRA or roll the IRA into a different IRA that gives me more options.

No. They offer the typical choices managed by one big financial company. I'm strongly leaning toward putting it all into one or more IRAs. I'm not comfortable limiting myself to the few choices that will inevitably be offered.

[DevilsFan]

Re: 401k reallocation questions

I personally would take my 401K and put it into some sort of IRA versus putting it into another company's 401K. It seems to me that one has infinite choices of investments if the money is in an IRA vs. probably fewer choices in another company's 401K. This assumes you have or will have the "expertise" to manage your own IRA.

I don't know the tax implications of putting money into a Roth if one is talking about 100K. If I worked today and if I made money and could put it into a Roth on a annual basis, I would. The only thing that bothers me about Roth's is whether or not someday our elected elete will renege and figure out a way to tax the Roth again. The notion of paying taxes on a sum of money once and then never again is rather unbelieveable, and perhaps I don't understand the Roth laws. It is my understanding that once money is in a Roth, that withdrawals are never taxable if the withdrawals occur after some stated age limit.

There is a lot written somewhere on iTulip and elsewhere about how to own gold. Even though GLD seems to be an investment in gold, it might not be. If one really wants to own gold, then bullion is the only real way to do it, and one cannot do that in IRA's as I understand.

Hopefully you will get a lot more input to your question. Also GTU is a gold fund and CEF is half gold and half silver, both of which may sell at premiums. Check http://www.etfconnect.com/select/fun....asp?MFID=3653 as a starting place.

Good luck, and be careful out there.

The reason I ask about a gold IRA is that this lump sum is my largest asset, and it would be nice to convert some of it to gold; however, I can't tap into it without paying a huge penalty. I can't take immediate possession of bullion with any of it unless I'm willing to take the hit. It seems like the whole system is gamed against those who want to take control of their own future.

I guess I'm leaning towards transferring all of it into a Roth IRA, starting over at the new company and max out that 401k until I hit the full company match, and start buying bullion with what's left over. The whole idea of buying shares of a stock of gold or putting it away until I'm 60 is a rather nebulous concept that I'm not entirely comfortable with.

[Jim Nickerson]

Re: 401k reallocation questions

The reason I ask about a gold IRA is that this lump sum is my largest asset, and it would be nice to convert some of it to gold; however, I can't tap into it without paying a huge penalty. I can't take immediate possession of bullion with any of it unless I'm willing to take the hit. It seems like the whole system is gamed against those who want to take control of their own future.

I guess I'm leaning towards transferring all of it into a Roth IRA, starting over at the new company and max out that 401k until I hit the full company match, and start buying bullion with what's left over.

For my curiosity, what will be your taxes on 100K if moved out of 401K and into a Roth IRA?

The whole idea of buying shares of a stock of gold or putting it away until I'm 60 is a rather nebulous concept that I'm not entirely comfortable with.

What is nebulous about this? What may be nebulous is "60" for early retirement.

[jk]

Re: 401k reallocation questions

i think you have to move it into a regular ira, not a roth, unless you want to pay taxes on it. don't forget, it's pre-tax money, as is a regular ira. a roth is post tax money. in a regular ira at a discount broker of your choice you'll have a huge choice of investment options.

[Uncle Jack]

Re: 401k reallocation questions

First timer here seeking some advice. I am contemplating a job change which will free up around $100,000 in my 401k to reallocate in some way. I'm not planning on tapping it (I'm still at least 25 years away from retirement), so don't worry about that. Instead, I'm trying to decide how to reinvest the money in either a new company 401k, a Roth IRA, or both.

One consideration is that the new company's plan is not as generous as the old company. The old company matched dollar for dollar on the first 5%. The new company only matches a quarter on the dollar for a $1000 maximum annual amount. Also, I really want to reallocate a decent percentage of my earnings into gold IRA of some sort. Can I take say 75% of my portfolio and roll it into my new 401k, then take the other 25% and open a Roth with gold as a significant portion of the portfolio? How does one go about adding gold to an IRA? If it were you, would you roll any of the funds into the new 401k, or would you take all of it and reinvest it back into Roths?

When rolling the money from an old employer the matching contribution should not even enter your mind, unless that is to say that the matching is a consideration of the new position and measuring the benefits of one employer against the other. Employers do not match on existing money, so the matching question on rollover money is moot.

I guess I'm looking for general opinions on what to do. If I change jobs, it will be my first time in the 13 years I've worked in the business world, and I don't plan on doing it again. I want to make sure I do this right.

Thanks,
Rob

Here are my comments:

If your new plan will allow it you can roll any amount or the whole thing over to the new plan. Your investment choices as you know are limited to what the plan allows. I have found investment options in some plans to be less expensive than what you can get on the "outside" so you should read the new plan's rules, choices, and expenses before deciding.

Any amount you roll to a ROTH IRA will be called a "re-characterization," and there are tax consequences based on current income levels when the move happens. This is a math puzzle and I'm here to tell you there are many assumptions you have to make, i.e. - there is not set rule of thumb. One of the assumptions is income level in retirement. Being 25 years away and with a congress that likes to change things based solely on the squeakiest of wheels, how will you know what tax bracket you will be in that long from now? - Answer, you can't know.

Therefore, rolling some (nice number, eh?) to a ROTH is a good consideration to hedge your bets against future tax law changes because withdrawals in retirement are tax-free.

The first step, if you want to have a ROTH, is to roll the whole thing to an Traditional IRA and then re-characterize whatever amount you're considering for/to a ROTH afterward. However, you may have the choice to roll some from a current plan to a ROTH, and this is usually up to the plan administrator as there are reporting requirements to the IRS that they have to follow.

If your hope of owning gold is for trading purposes, the paper kind should suffice. If your owning gold is for end of fiat money times, then physical is the way to go. Trading gold in a taxable account, and the physical kind, comes with a 28% capital gains tax so any physical gold you hold should be for very, very long term purposes, what like to call "ancestral planning."

Without getting specific I will tell you that I own a few physical coins and I trade the paper kind inside my IRA occasionally.

You should know where to find me for more questions. Good luck.

Uncle Jack - aka Jack Stevison, CFP®

[DemonD]

Re: 401k reallocation questions

I have heard that it is legal to own things like Real Estate under a retirement account like a rollover IRA. I would suspect one could do that with gold bullion and coins too.

[Uncle Jack]

Re: 401k reallocation questions

I have heard that it is legal to own things like Real Estate under a retirement account like a rollover IRA. I would suspect one could do that with gold bullion and coins too.

Yes, you can own physical gold in an IRA.

Real Estate held inside in an IRA loses some of the tax advantages of owning real estate, such as mortgage interest, taxes, etc. I wouldn't advise it.

[rj1]

Re: 401k reallocation questions

I've also been wondering about where to put my 401(k) money to be "recession-proof" although that's an oxymoron. I don't have an IRA currently (I've only been working for 3 years). My company's 401(k) has the company stock, Vanguard funds, PIMCO bonds (which I thought would be the way to go but I've come to realize they'll suck after reading PIMCO's own head say it's not going to be too good), a general international fund, and general large equity and small equity domestic funds. I figure large equity would crash, small equity I'm not too sure, international would be better than domestic, and Vanguard would be okay. Does that strike everyone as a fair assessment?

[DemonD]

Re: 401k reallocation questions

RJ:

In a recession, small caps tend to fall farther than large caps. International may hold up better, especially if the fund has large holdings of german, brazilian, and UK companies. The only thing that would be "recession proof" would be cash, but large cap value (both domestic and international) would be where you would want to park your money. Companies with good, solid dividends and a good track record tend to hold up much better, also companies with staple products like MMM, PG, JNJ, CL will hold up better. Most of these companies would fit the large value sphere, and if there is a recession, your dividend reinvestment plan will dollar-cost-average your investment downward while you continue to gain shares and capital in the companies. This is why I am a big fan of the vanguard large cap value fund VIVAX. The only problem with buying the fund over the companies though is that a lot of "value" companies are financials, which is not where you want to be.

best of luck.

[Guest]

Re: 401k reallocation questions

GEORGE SOROS - ON HIS INVESTMENT PHILOSOPHY

Being so critical, I am often considered a contrarian. But I am very cautious about going against the herd; I am liable to be trampled on. According to my theory of initially self-reinforcing, but eventually self-defeating trends, the trend is your friend most of the way; trend followers only get hurt at inflection points, where the trend changes. Most of the time I am a trend follower, but all the time I am aware that I am a member of a herd and I am on the lookout for inflection points.

The prevailing wisdom is that markets are always right. I take the opposition position. I assume that markets are always wrong. Even if my assumption is occasionally wrong, I use it as a working hypothesis. It does not follow that one should always go against the prevailing trend. On the contrary, most of the time the trend prevails; only occasionally are the errors corrected. It is only on those occasions that one should go against the trend. This line of reasoning leads me to look for the flaw in every investment thesis.

My sense of insecurity is satisfied when I know what the flaw is. It doesn't make me discard the thesis. Rather, I can play it with greater confidence because I know what is wrong with it while the market does not. I am ahead of the curve. I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded.

_________________


GEORGE SOROS - INVESTMENT PHILOSOPHY (summarised)

Wait for very high probability bets and then take a major (concentrated) position.

MOHNISH PRABAI - INVESTMENT PHILOSOPHY (summarised)

Wait for very high probability bets and then take a major (concentrated) position.

http://www.gurufocus.com/ListGuru.ph...Mohnish+Pabrai

JOEL GREENBLATT - INVESTMENT PHILOSOPHY (summarised)

Wait for very high probability bets and then take a major (concentrated) position.

http://www.gurufocus.com/ListGuru.ph...oel+Greenblatt

_________________


ADEN SISTERS, ON THE MOST RECENT (SECULAR) TREND CHANGE



DOW - PRICED IN OUNCES OF GOLD




CONCLUSION OF THESE TWO CHARTS - Precious metals have just (a bit belatedly) received their confirmatory signal for a "high probability bet" with a 5 - 10++ year time horizon - (conservatively means I re-examine the environment for a reversal trend change very carefully in five years - but five years probably at the earliest = This equals a HIGH-PROBABILITY near term bet because I am looking at only being in the early part of this newly charted trend)

COMMENT :

The comments on tax and retirement account strategies on this thread seem to me to summon too much of a close-up view on the tax technicalities of investing. I question these appraisals of what benefit tax sheltering will confer because it's very possible stocks will struggle to exceed inflation and history provides ample precedent for that in the 1970's. With potentially soaring inflation we may well face a decade of potentially substandard stock market returns.

I question the entire idea of obtaining any real inflation adjusted return in the stock markets in the next decade by investing there right after long term yields have broken a 20 year channel to the upside and debt and leverage are as large a structural issue as they are here and abroad today.

Equity markets looking forward may be quite risky for a long time if today's long rates turn out to have been super-low in 2007 and will rise to 10% or 12% or higher in a long slow inexorable rise in the next ten years. Equity markets may instead soar on liquidity "anomalies"- but we will head into uncharted waters in terms of unacceptable risk - with derivatives and creaking credit markets getting as huge as they are. The 1970's provided a lot of wild stomach churning for essentially a zero inflation adjusted return in equities (other than perhaps energy shares).

This thread discusses: Do we or do we not tax shelter - how much in matching funds do we forego in different options - what are the fund costs? - do we hold physical bullion or look to trade paper metals with an eye on tax hits?

These are considerations that will tweak the results five years out by perhaps 30% of expected gains? What are the expected gains? What's 30% of a 75% expected five year return vs. 30% of a 500% expected five year return? Seems to me what matters more is what sector you decided to overweight in the current environment.

A 30% tax consequence is unacceptable on a 75% return. Perhaps it's less than critical on a 500% return, even if you turn around and sell your bullion at 28% tax hit in 5-6 years.

What were typical returns from holding plain bullion gold and silver within the period described in the ADEN's chart above, from 1961 to 1981 during the last interest rate up-cycle? It was a roughly 20 years run on that last major trend change - 2000%?

Do we then allow arguments for equities or paper gold being more tax efficient to overshadow the primary consideration of what instrument or sector to invest in with at least a 200% - 300% return in mind?

Pick bonds, stocks, real estate, warrants, annuities. Pick gold, pick commodities, pick energy - ex commodities. Tax strategies won't mean much if we pick the wrong sector.

The ADEN chart above indicates a confirmatory signal only just appeared WEEKS ago. Since 2000, gold's up move in inflation adjusted terms is (as I-Tulip notes elsewhere, a "blip"). These are 15 - 20 year interest rate cycles.

I've read excellent commentary from Bob Hoye, of INSTITUTIONAL ADVISORS as to what happens to precious metals prices in inflationary long term cycles, when the yield curve moves to steepening. Mr. Hoye can not be described as a "gold bug". This commentary was written in 2005, but his signposts have only become clearer today.

http://www.institutionaladvisors.com/

Bob Hoye:

<< throughout the period under review, the behaviour of gold's real price, or purchasing power, or mining profitability has been consistent. It has recorded a significant low during the bubble era and then, once completed, gold's real price increased for some 20+ years.

Some confusion in the goldbug ranks can be reduced. Over the past 300 years, there have only been two bull markets for gold in senior currency terms. The first one ran for some nine years in the early 1800s and ended when the great financial mania that blew out in 1825 got underway.

The only other example ran for some nine years until 1980, from which collapse set up the era of bubbles, during which gold would be likely to set a significant low.
The following charts show two things. One is that our commodity index seems to be replicating the key top in the late 1980s.

The other - the gold/commodities index - details the end of the tech bubble in 2000, which was similar to gold's behaviour through the climax of the two previous stock bubbles. When the U.S. was not on a gold standard, gold's real price declined until that stock bubble blew out in September, 1873. More specifically, it declined until November, 1873 when, with the reversal in the yield curve from flattening to steepening, gold began its first cyclical recovery and the economy suffered its first cyclical contraction within a secular post-bubble contraction.

On the next bubble, the U.S. was on a quasi-gold standard and it blew out in September, 1929. Then gold's real price reversed to a cyclical recovery in November along with the yield curve reversing from flattening to steepening.
Both the 1929 and the 1873 examples followed the pattern that was recorded with annual numbers at the bubble tops of 1825, 1772, and 1720. Gold recorded a cyclical decline with the mania and then, with the initial business contraction, it enjoyed a cyclical recovery.

This recovery in stocks, business, and credit markets is showing some of the classic signs of topping at the same time as the gold side of the equation is indicating downside capitulation.

In which case, the second cyclical bull market whereby gold will outperform most commodities as well as most financial assets is about to get underway.

_________________


Anyone prepared to spend a half hour browsing through Mr. Bob Hoye's articles and the Institutional Advisers website will recognize this man's caliber, historically grounded sobriety, and qualifications.

So here we have history serving up a long slow pitch up the middle of the field, what I believe is called a "fat pitch"? In my to-do list, before I undertake the drudgery of examining carrying costs, tax strategies, diversification, fund cost implications, employer matching funds, etc - I will look for the (unlikely prospect!) a genuine fat pitch is traveling lazily overhead, or indeed is anywhere in sight.

If I'm singularly lucky enough to find myself in the middle of my investing lifetime - with a rare SECULAR fat pitch bowled straight down the middle of the field at me, I will take a leaf from the book of the above three successful investors and give it my serious attention.

Respectfully,

Lukester