5 Strategies for Protecting Your 401(k) Savings

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Weighing your options when it comes to your portfolio

This article was originally posted at Len Penzo dot Com and we thought it gave a good perspective of how and why one person started buying precious metals as part of his portfolio. We’re not financial advisers, we just want you to choose what’s best for you.

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Judging from my email, more and more of you are becoming interested in protecting your wealth — and I’m happy to see it. Last week, one of my loyal readers, Jen from Virginia, asked:

Should I focus on contributing as much to my 401(k) retirement plan as possible, or allocate some of it to buy precious metals, and if so, how much?

Unfortunately, there is no one-size-fits-all answer; how you allocate your retirement savings is entirely up to you and nobody else.

That being said, I no longer contribute any money to my 401(k) plan. That’s right; not a penny.

It’s a decision that didn’t come lightly.

After faithfully contributing to my 401(k) retirement plan for many years, I finally found the courage in 2011 to limit my 401(k) contributions to only take advantage of the full company match and use the residual cash to purchase wealth insurance in the form of physical gold and silver.

Eventually, I concluded that the risk of a US dollar collapse was significantly greater than the added benefit I was getting from my company’s 401(k) match, so I stopped contributing entirely. Since then, all of my nest egg contributions have gone towards the purchase of precious metals.

Is that radical? Absolutely.

Frankly, in a properly-functioning financial world, I would never make such a move. However, times have changed. The Fed’s reckless monetary policies — persistent near-zero interest rates and quantitative easing — have distorted the financial system so badly that conventional wisdom regarding strategic management of personal finances has been turned on its head.

If I thought the risk of a US dollar collapse occurring before I reached retirement age was only, say, 50% or less — then I would still be contributing to my 401(k) plan to at least catch the company match. However, that’s not the case anymore; I believe the probability a dollar collapse before the end of this decade is now closer to 95%.

Again, that’s my assessment. You must draw your own conclusions.

Buying Wealth Insurance

So, how much physical gold and silver is required to protect the hard-earned wealth that’s locked-up in your 401(k) retirement plan?

In his new book The Death of Money, author James Rickards notes that:

A useful way to think about (precious metal’s) insurance function is that a 500% return on 20% of a portfolio provides a 100% portfolio hedge.

I know what you’re thinking: What the heck does that mean?

If James is correct — and I believe he is — it means that you can fully protect the wealth that’s currently locked in your 401(k) plan by keeping precious metals in your possession equivalent to 20% of your total nest egg. Here’s a slightly over-simplified example:

Let’s say you have a $50,000 nest egg: $40,000 in your 401(k) and $10,000 in physical gold and/or silver. In this case, $10,000 in precious metals represents 20% of your total savings.

Now let’s say the dollar collapses and its value essentially falls to zero. If that happens, worst-case, the $40,000 in your 401(k) would be:

$40,000 x 0 = $0

Rickards (and many others) estimate that if the dollar tanks, the value of precious metals in your possession will increase five times (500%). I think that’s extremely conservative — but let’s stick with the conventional wisdom of five times. If that’s true, then the $10,000 held in precious metals would now be worth:

$10,000 x 5 = $50,000

Do you see what happened? Although your 401(k) was completely wiped out, the post-collapse value of your physical gold (and/or silver) soared to $50,000! In other words, the dollar became worthless, but the purchasing power of your nest egg remained unchanged — and that is how a portfolio protected with precious metals acts as wealth insurance.

Protection Strategies

If you’re considering a little wealth insurance to protect the retirement nest egg you’ve currently got locked up in your 401(k), there are multiple options to consider, depending upon your tolerance for early withdrawal penalties and your confidence in the on-going viability US dollar. Assuming your goal is to achieve a 20% portfolio allocation in precious metals, here are five potential ways to get there:

1. If you’re certain collapse is imminent, you could pull 20% from your 401(k) immediately, take the tax and penalty hit for early withdrawal, and then buy precious metals with the remaining proceeds. Then again, if you were that certain of collapse, you’d probably want to pull all your money out of your 401(k) and just replace it with physical precious metals.

2. If you believe a collapse is probable, but not imminent, you could temporarily stop your 401(k) contributions until you acquire enough precious metals to make up 20% of your portfolio. Then, resume allocating 80% of your savings to the 401(k) and 20% to physical precious metals.

3. If you believe a collapse is possible, but more than several years away, you could contribute only enough to your 401(k) to get the company match — and use additional funds to buy precious metals a bit more gradually, until 20% of your nest egg consists of precious metals.

4. If you think collapse is a long shot, but still want insurance — just in case — you could continue maximizing your 401(k) contributions and only purchase precious metals whenever you find a little extra spending money.

5. You could borrow from your 401(k) and use the proceeds to buy physical precious metals — if possible, equivalent to 20% of your total retirement nest egg. Yes, if you lose your job you’d have to pay back the loan within a short time frame in order to avoid withdrawal penalties and taxes. However, since the proceeds are only being used to exchange fiat dollars for real money, paying back the loan shouldn’t be difficult.

Of course, you could also pass on wealth insurance altogether — essentially betting on a strong US dollar, healthy world financial system, and the ability of the powers-that-be to continue holding things together far into the future. But that’s for you to decide.

How will you know which path is the right one for you? The only sure way to tell is by observing how well you sleep at night after making your decision.

As for me … I sleep like a baby.

Weekly Gold & Silver Market Report – 10/17/2014


Klaus Schwab, founder of the World Economic Forum, prefaced the World Economic Forum’s 2014 Global Risk Report: “Our lives are changing at an unprecedented pace. Transformational shifts in our economic, environmental, geopolitical, societal and technical systems offer unparalleled opportunities, but the interconnections amongst them also imply systemic risks. This report aims to enhance our understanding of how a comprehensive set of global risks is evolving and how their interactions can lead to unexpected and often systemic impacts.”

The U.S. stock market had been cruising in overdrive, while economic reports from the eurozone, China, Russia, Japan, Argentina and many other parts of the world turned negative. It was as if the fact that we live in an interconnected global economy, as learned from the Great Recession, was being ignored. Following the release of the Federal Open Market Committee meeting minutes expressing concern that the global economy could negatively impact the U.S., the dollar and stocks began to go down while Gold saw a revival.

Despite this seemingly negative news, the stock market staged a rally Friday. Dennis Gartman, founder of The Gartman Letter, believes the bear market has just begun. “This is the start of a bear market. You stay in cash and you stay in short-term bonds and you don’t move out, this is a very difficult period of time and I’m afraid – and I don’t like to think about it – but this might be the very beginnings of a bear market that could last some period of time,” he warned on CNBC’s “Squawk Box” Thursday.

Federal Reserve Chair Janet Yellen is greatly concerned by the continued increase in income inequality in the U.S. “It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority,” Yellen said Friday at a conference on inequality sponsored by the Boston Federal Reserve. Although Yellen said that to a certain extent the inequality is a result of hard work and risk taking, her concern is that “inequality of outcomes can exacerbate inequality of opportunity, thereby perpetuating a trend of increasing inequality.”


The Benefits of Purchasing Precious Metals Online Vs. a Physical Location

455649179Whether you’re a collector, an investor, or a dealer, choosing where to buy gold, platinum, or other precious metals is an important step. When you make the decision to invest your money in something so valuable, you’ll want to make certain you’re conducting a safe transaction that will offer you variety and fair pricing. While you could go to a physical location to shop for precious metals, purchasing coins and bullion online offers many more benefits.

Enjoy Variety

One of the top reasons to purchase precious metals online is you get access to a virtually unlimited supply of coins and bullion. Online retailers often have much more space than most physical stores, and this means more of a selection for you as a buyer. Whether you’re trying to buy silver, platinum, or gold, choosing to work with an online retailer will give you the freedom to choose from a wide range of different options. The larger selection ensures you’ll be able to find high-quality precious metals you’re looking for.

Lock In Prices

When you’re trying to buy gold, platinum, or silver, the last thing you want is a surprise when it comes time to check out. You want to know exactly what you need to spend and whether or not it’s the best price. If you shop a brick-and-mortar store, there’s no guarantee you’re going to get the fairest, up-to-the-minute pricing. When you buy silver, gold, or platinum online, there’s a greater chance you’ll get a better price. Most online precious metal retailers update their prices in real time, which ensures you always get the fairest price.

Convenient Shopping Anytime

Many buyers want to think about their choices before buying precious metals. If you’re shopping at a storefront location, you have to accommodate your browsing time around someone else’s schedule. If, however, you choose to buy platinum, gold, or silver online, you can shop 24 hours a day, 7 days a week. You won’t be locked into browsing during normal business hours. Instead, you can browse coins and bullion on your time.

Don’t stress out over where to buy gold, silver, or other precious metals. You can confidently buy online from APMEX, a leader in no-surprises, no-hidden cost pricing. With a wide selection of high-quality precious metals, coins and bullion, quick shipping, and excellent service, you’re sure to become an APMEX customer for life.

APMEX launches new APMEXclusive® Royal Canadian Mint ¾ oz Silver Coin.

The Legend Lives in the 3/4 oz Silver Royal Canadian Mint Grey Wolf Coin

The Legend Lives in the 3/4 oz Silver Royal Canadian Mint Grey Wolf Coin

APMEX has launched their most recent product, the 2015 3/4 oz Silver Canadian Grey Wolf Coin, from the world-renowned Royal Canadian Mint. We recently sat down with some members of the more than 1,100 strong RCM team to talk about this latest product featuring APMEX as the world retailer outside of Canada.

Joining from the Royal Canadian Mint were Senior Manager of Communications Alex Reeves, Product Manager Gabriel Khan and Senior Engraver Stanley Witten.

The Mint worked with Canadian artist Pierre Leduc to create the unique design for this coin, which portrays one of the most legendary and stunning animals on earth, the Grey Wolf, in its natural habitat. Reeves noted the design of the wolf is “reflective of Canada and its identity, but it’s something that resonates with Americans as well” as we share a continent.

Once the design completed the stringent approval process, it was on to the engraving. Witten, 25 year engraver with the Royal Canadian Mint, started his relief process with the artist’s finalized drawing. Using 3-D software called Arcam and a pressure sensitive stylus on a tablet, Witten meticulously turned the coin from drawing into virtual art that could be made into a moldable piece. Details such as the transition from fine fur to coarse and the minute detail of the razor sharp teeth are all precisely fashioned with only a maximum .2 mm relief.

Witten noted one of his favorite aspects of the Grey Wolf coin was that something was “happening on the coin and was not a static image” giving it a “unique perspective while keeping the image simple with enough detail to keep it interesting.”

Total time from initial concept to readied coin is 6-8 months, showing the true care and precision the Royal Canadian Mint takes into consideration for each of their products. “We’re very keen on demonstrating our capabilities to the fullest by offering more to the customer,” Reeves stated. They certainly held to that standard with this piece of specialty bullion. The 3/4 oz Grey Wolf coin truly sets itself apart, not only with its unique 3/4 oz size, but with its artistry and fineness, containing the RCM’s signature .9999 fine Silver purity. Khan noted, “We have probably one of the best looking coins in the world,” and we’d have to agree.

While interviewing the three Royal Canadian Mint team members, we couldn’t help but recognize the sense of pride they all conveyed when speaking about the coin, their country and their company. When asked about it, Khan responded, “We don’t see it as a job, we see it as a passion.” This notion was seconded by Witten, stating, “We have a lot to be proud of.”

The Royal Canadian Mint produces some of the world’s most attractive coins and we are excited by this latest product. APMEX is the exclusive retailer outside of Canada for the 3/4 oz Silver Canadian Grey Wolf coin, demonstrating our commitment to bringing unique and interesting products to our customers.

Weekly Gold & Silver Market Report – 10/10/2014

This week was positive for Gold and Silver, while the U.S. stock market suffered sharp losses after a good start on Monday. Economic data coming out of the U.S. along with the jobs report maintained positive momentum. However, economic data coming out of the Eurozone, especially Germany continued to paint a dismal picture. The declining European economy is not new information, but it was as if this week the light went on and the revelation we learned back during the Great Recession hit home…we live in an interconnected global economy. Lighting quick global communications fosters a world where geopolitical, economic and Black Swan events eventually affect everyone. No country exists in isolation. The FOMC minutes released on Wednesday showed concern, that a declining European economy could put the brakes on U.S. growth.

It is rare that the minutes of FOMC meetings reveal information that rises to the level of surprising, but Wednesday’s release can be considered no less than surprising. Despite this, there is still a great deal of debate within the Fed as to when to raise interest rates. Perhaps they will not be raised as quickly as the market has grown to expect. Gold and Silver prices shot up on the news, but surprisingly, U.S. stocks did not. Normally stocks would rise in this scenario, so why not now? Because much of the Fed concern was the rapidly deteriorating global economy and it’s potential to affect the U.S. recovery.

The Fed is not the only organization concerned about global growth. The International Monetary Fund (IMF) projections that came out on Tuesday caused stocks to slide and Gold and Silver to go up. Gold traded higher Tuesday as investors sought the safe-haven appeal of Precious Metals following a report by the IMF that cut its global growth forecasts. “Following yesterday’s rally, traders are in a wait-and-see attitude now after the IMF lowered world growth and issued some market risk warnings,” RBC Capital Markets Vice President George Gero said. With Gold recently dipping below $1,200 per ounce, physical buying demand has increased both domestically and abroad, lending support for the yellow metal this week.

To close out the week, Jim Grant, founder of Grant’s Interest Rate Observer stated that the Federal Reserve needs to return interest rates to more normal levels and free the financial markets from government sponsored price controls.  “The real value of asset prices would come in “clearer focus” if rates were not so artificially low, Grant said on CNBC’s “Squawk Box” Friday. This comes a day after the Dow Jones industrial average dropped by 334 points, something that has not happened since February. “Interest rates now are not discovered as one discovers prices in a free market. They are administered and imposed,” Grant said.

Weekly Gold & Silver Market Recap – 9/12/2014


Gold and Silver prices took a big step back this week with prices dropping from Monday’s opening prices. The loose monetary policies in Europe, China and Japan continue to de-value their currencies and conversely drive the U.S. dollar to highs we have not seen as of late. Safe-haven appeal is moving out of other currencies and into the U.S. dollar.

Safe-haven concerns fell this week as tensions in Ukraine and the Gaza Strip have eased for the moment. This did not stop the U.S. and the European Union from announcing new, harsher sanctions over Russia. For the first time, Russia’s Sberbank was targeted. These sanctions will affect oil and defense industries and further limit the access of major Russian banks to U.S. debt. The European penalties included asset freezes on leading Russian politicians and restrictions on financing for some Russian state-owned companies.

An interesting development in Scotland could have an effect on Gold prices later this month. Scotland’s voters go to the polls on September 18 to decide whether they should break away from the United Kingdom, or not. If Scotland does vote for independence, there will be a distribution of assets that will include Gold.  The U.K. owns about $12.6 billion and is the 18th largest holder of Gold (central bank holder). Scotland would also be faced with the decision as to whether or not to create their own currency.

Nothing goes up forever and investors are aware that U.S. equities have experienced a very long winning streak. When will U.S. equities lose steam and correct? Until this happens, it is likely that Gold and Silver prices will remain under pressure. Both Precious Metals and equity markets will continue to try and read the “tea leaves” and anticipate future Federal Reserve action. The ending of QE3 is a foregone conclusion, but when will the Fed raise interest rates and can they accomplish this without major disruptions? The next Federal Reserve Open Market Committee is September 16-17.


Weekly Gold & Silver Market Recap – 9/5/2014

9/5/2014 3:15:33 PM By: Brandi Brundidge


The short holiday week began with the U.S. dollar jumping to a one-year high Tuesday morning, forcing Gold down to its lowest level in 2 ½ months. Strength in the dollar and ongoing confidence among U.S. equities offset concerns about escalating tensions between Ukraine and Russia. “It’s when the dollar hits big numbers that Gold gets punished and this is clearly one of those moments,” Ross Norman, CEO of bullion broker Sharps Pixley, said. Domestic and overseas investors were closely eyeing the movement of global currencies for the week as the European Central Bank (ECB) had investors awaiting their policy meeting. Many expected ECB President Mario Draghi to ramp up the region’s current level of market liquidity with asset purchases known as quantitative easing (QE). The announcement of such measures would likely weaken the euro further, and bring the Gold price down with it, as the dollar would be strengthened by the potential inflationary result of such a program.


The Gold price moved slightly higher after Wednesday’s morning trading as the yellow metal continued to be pulled in all directions by outside factors. One of those factors, the ongoing situation between Ukraine and Russia, also affected the Palladium price. Russia is the world’s largest producer of the metal commonly used in the automobile industry, and as more sanctions are put on Russia, exports of Palladium would likely decrease. Thus, the seemingly easing tensions in that region have caused the price of the metal to fall.


The U.S. dollar began to decline Wednesday after three days of consecutive gains. Talks of a potential ceasefire between Ukraine and Russia have helped ease tensions in the region. Masafumi Takada, a New York-based director at BNP Paribas SA, said, “Headlines about a Russia-Ukraine ceasefire are definitely positive for the euro. Also, the market has been accumulating long U.S.-dollar positions lately, and there’s some position-adjustment liquidation ahead of the [European Central Bank] tomorrow and nonfarm payrolls on Friday.”


Strength in the U.S. dollar has once again marginalized the demand for bullion Thursday as the greenback climbed to its highest level since July 2013.  The yellow metal was in positive territory until news from Europe revealed plans by the European Central Bank to cut interest rates and begin an asset purchase program in an effort to stimulate the region’s lagging economy.   However, some experts are downplaying the significance of this endeavor as it relates to Precious Metals prices.  “Yes, today people are excited, but how many positive jolts can the world take from another central bank lowering interest rates before people get immune to that,” Jorge Beristain, an analyst at Deutsche Bank AG, said.


Precious Metals continue to tread water inside a relatively slim trading range since last year’s massive pullback.  Though improvement in the domestic economy and stocks have lured investors away from safe-haven investments like Gold and Silver, some experts believe an impending shortage in Gold supply could force the yellow metal higher in the near future.  With lower prices, new exploration of the metal has slowed and a general tightening of the sector has resulted in a lack of new Gold deposits.  With less money being spent to fund fewer projects, Gold is still being extracted at 1.5 times the expected depletion rate.  Supply concerns should be noted as most Precious Metals investors possess a long-term investment strategy for their Gold holdings.


A disappointingly low number of jobs were created in August, allowing the Gold price to recover Friday from some losses incurred earlier in the week. The U.S. Labor Department reported an increase of just 142,000 jobs. Many economists had expected a level near 228,000 or more. U.S. stock futures dipped on the news, pointing toward a lower open for Wall Street.


Some investors were surprised Thursday’s announcement of monetary policy easing in Europe didn’t have more of a positive effect on Gold. UBS said in a note Friday morning, “It would have to take more aggressive action from the ECB, which is likely to come alongside a sharp deterioration in eurozone growth, for Gold to benefit significantly. In this scenario, concerns on weaker growth could potentially reactivate physical demand in Europe, should the fear-trade gain traction.”