Why Isn’t Silver and Gold Offered Under Your 401(k)

In this post I want to talk about precious metals and retirement accounts. This is going to be an important article with lots of valuable information. I’m going to talk about two main products: IRAs and 401ks or 403(b)s and why gold and silver aren’t offered but should be.

To begin, it’s important to understand several things about IRAs.

First off, only specific products that meet certain requirements are eligible for IRA’s. For example, for a Gold IRA the minimum gold fineness is .995. The minimum silver fineness: .999, while the minimum platinum and Palladium fineness are both 9995. 

Now it’s important to point out, the American Gold Eagle is the only exception to the following numbers. Some examples of bullion not approved are pre-1933 gold, gold Krugerrands, and 90% US silver coins.

Now precious metal IRAs work just like regular IRA’s, it’s just the underlying asset is different. You’ll own the physical asset, say gold or silver, and that will be stored at a depository institution. If you want a distribution, you can have the precious metal sent to you, but if you’re under 59.5, then there is a 10% penalty. Most people prefer to hold their precious metals – myself included, still gold and silver IRAs are not a bad option as they are secure and insured. In addition, they are a much better option, in my opinion, then something like a Gold ETF, where you don’t hold the physical asset anywhere. 

All that said, we have to look at some of the disadvantages of precious metal IRAs. The main advantage of an IRA is that it is tax deferred meaning you don’t pay taxes until you withdraw it. This is in contrast of course to something like a stock mutual fund where you would pay capital gains tax each year. The tax you pay for an IRA depends on the type of IRA as well (Reasons to Buy Silver).

To me the main disadvantage of precious metal IRAs is you’re basically paying taxes on money since precious metals are money, not investments. This is key here. If you buy the precious metals outright and hold it at your home for 20 years, you of course pay no taxes on it. 

So, in sum, the way I see it the government states precious metals are investments, not money.

Moving on to the 401(k), this is where things really hurt the average saver. First off, 401k plans are employer sponsored plans offered by companies for an employee’s retirement (read about issues with social security here). They consistent of both employee and employer contributions and the contributions can be either before or after tax. 

All 401k plans dictate though what you can and cannot invest in and interestingly, I cannot think of any plan that allow people to put their money into physical gold or silver. I believe that officially the reason is that precious metals are considered collectibles or perhaps are considered speculative investments. Regardless of the reason, it should be allowed, and I’ll give you a few important reasons why:

1. There are people out there who just want to save money (Read How the System Rewards Savers here). Precious metals are a good place to put one’s money if interested in preserving capital. Some people will say T-bills and mention how the government has never defaulted on one, but if you buy these your returns are being eaten up by inflation (Why Hyperinflation Could Come).
2. The second reason is that people put more into their 401k plans than IRAs usually. The contribution limit is higher and there is also a 401k match a lot of times. So, people are being forced to put money into stock or bond mutual funds inside the 401k when those funds don’t really meet their goals.
3. The third point is that the government and big institutions push this. They want people in the stock and bond markets so they can stay artificially high. It keeps shareholders happy, as well as executives and politicians.

All in all, the system is not set up to support people wanting to preserve their purchasing power and save their money in a safe and efficient manner.

Thanks