Can I buy gold using my 401(k) to protect myself from a market crash

Post on: 22 Июль, 2015 No Comment

Can I buy gold using my 401(k) to protect myself from a market crash

By Matt Krantz, USA TODAY

Gold bars stacked at the plant of gold refiner and producer Argor-Heraeus.

A: Investors are terrified of any word that ends in “flation.”

Deflation, or a period of falling prices, can be lethal to an economy because consumers stop spending knowing that things will be cheaper if they wait. Inflation can be just as brutal, as the value of money erodes to the point you need a fistful of $100 bills to buy a loaf of bread.

Hard assets, like gold, are typically where people terrified of any “flation” run to. The idea is that gold, given its innate rarity and historical importance to people, will hold its value no matter what happens to government-issued paper currency. Given the intense fear about both inflation and deflation, it’s not surprising to see that the price of gold has soared. The SPDR Gold Shares exchange-traded fund has jumped more than 200% since the end of 2004 as investors stockpile the metal fearing trouble for the dollar.

Investors can buy into gold in several ways, including purchasing the actual metal and storing it in a safety deposit box or burying it in the backyard. You can also buy various claims to gold, including futures contracts, or exchange-traded fund (ETFs) that allow you to trade gold just as you’d trade shares of a company’s stock.

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But what about owning gold in a 401(k) retirement account? It’s the gold ETF that most likely will be the answer to your question. Most 401(k) plans by default urge you to select from a menu of traditional mutual funds, that are usually invested in things like large U.S. stocks, bonds or a blend of both. You’ll want to first check, and it’s highly unlikely, whether your 401(k) plan offers a precious metal fund as an option. If not, you’ll need to try a couple of other options.

Can I buy gold using my 401(k) to protect myself from a market crash

First, most 401(k) administrators offer a brokerage option. With the brokerage option, you can invest in individual securities other than the mutual funds offered in the plan. You could use the brokerage option in your 401(k) to invest in one of the many gold ETFs that are available. Just keep in mind, though, that the fees with the brokerage option at many 401(k)s tends to be very high. However, you might see these fees as worthwhile in exchange for being able to invest in gold.

Another option to consider is rolling your 401(k) to another provider. If you don’t work with the company that issued the 401(k) any longer, or in other instances based on your age, you might be able to roll over your 401(k) to a brokerage or mutual fund company that offers gold mutual funds or ETFs.

Lastly, and I don’t recommend this, but you could pay the early withdrawal penalty and yank your money out of the 401(k) and use the money to buy gold. The fees are huge and this could put a serious dent in your retirement, forcing you to work much longer. However, if you’re that worried about inflation, maybe that’s a massive risk you’re willing to take.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at twitter.com/mattkrantz.

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