Obviously, as citizens or residents of the United States of America, retirement planning / savings account is an important topic to maximize your financial security / future. And investing in gold bullion is the safe haven through the mechanism of using 401k income.

This could 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 to take action for the “rainy day” by subscribing to their employer’s 401K.

401K bolts and knots

401K is a retirement savings / investment account whereby employees set aside a certain portion of their monthly salary before taxes. Most employers have this package or corresponding equivalents for their employees for the purpose of improving long-term savings.

Almost all contracts have pros and cons, 401K is also not exempt. The identifiable merits of 401K are highlighted below;

1. Deferred taxation. Your salary contribution to the 401K is deducted at source before taxes. Therefore, you are tax-free at the time of contribution, but the applicability of taxes is deferred for later years when you withdraw from the system.

2. Reduction of the tax base. Sequel to number one above, because your contribution is not taxable, the tax you must pay is based on your salary balance after deduction for 401K. This has drastically reduced your taxable income and taxes paid weekly or monthly, as the case may be.

3. Counterpart contribution. The 401K is a savings for your retirement, and your employer is assumed to be part of that contribution as well. Some employers who recognized the importance of retirement provisions for their employees offered a matching contribution, which is a specific percentage added to the employee contribution.

4. Long-term savings / investment. This retirement savings can be for several years (long term), for example, an employee who joins the employer’s service at age 20 may have the opportunity to contribute until retirement age (60 years). That means that your contribution is for a period of 40 years, so you have a large accumulation of funds at retirement.

5. Composite ROI. The return on the investment worsens and this will enhance the rapid growth of the fund accumulated over the 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 to choose the investment opportunity among those provided by the internal scheme or managed by advisory.

ii. High operating expenses. Professional fees and other expenses in managing the plan are often high compared to the individual retirement account (IRA).

iii. Penalties for cash withdrawal before retirement. The early withdrawal of cash from the scheme will merit a penalty of a specific percentage as established in the terms and conditions of the investment portfolio.

Now, having discussed the 401K pros and cons at length, the question is how I used my 401K retirement savings.

Use of the 401K retirement fund

Sincerely, you have a number of options available to you ranging from company stocks to index funds, bonds, “target date” retirement funds, and more.

To this end, the simplest course of action is to identify the lowest cost and most diversified mutual fund that considers gold bullion as part of the investment combo.

You can also read other posts on this blog that specified the importance / reasons why gold bullion should be part of your investment portfolio.