The path to wealth is slow. Most people think that the richest percent of the population gained their success overnight. But that’s only in the movies and if you win a lottery ticket. Everyone else’s success is attributed to hard work, persistence, grit, and patience.
A prime example of that is Warren Buffet. His upbringing wasn’t special, but he worked on his money for the last 50 years. The thing he references most about his success is his time in the market. Time in the market beats timing the market. Click here to read more.
It’s one of his most popular sayings, and we should all learn from that. With all of that said, how should you approach investing? Should you start a 401k, or should you put all of your money into gold? We’re going to cover everything.
What’s a 401k, and how does it work?
We’ll start with the basics. A 401k is the equivalent of a retirement account that you can sign with your employer. The reason it has a weird name is that it’s based on a section from the US Revenue code. The way it works is simple.
You pay a bit of money out of your account every month, and your employer matches it towards your fund. All of this money isn’t subject to taxes until you take it out. That usually happens when you retire, and if you know what to do, you can even avoid the taxes after retirement.
There are two types of this plan, and one if it is Roth, and the other one is traditional. They’re essentially the same thing. The only thing different is the taxation. If you want, you can get either one, or you can get both.
The most you can put into this account is 20 grands if you’re under 50 years old, and that number goes to 26 thousand if you’re over 50. Your employer can match it or cap it up to 60 thousand dollars. Follow this link for more info https://www.kasasa.com/blog/401k-guide/.
What are the differences between a traditional and a Roth 401k?
These plans were invented more than 50 years ago, and they were pretty slow to catch on. Now, most senior citizens can’t imagine their lives without them. Depending on your tax bracket, you can pick a plan and see whether you fall in a higher or a lower category.
If you’re going to be in a higher bracket, then it makes more sense to go for a Roth version since you’ll pay fewer taxes in the long run. However, no one can predict how the system is going to respond to these plans, and that’s why most advisors suggest people have a bit of money into both accounts.
What is a Gold IRA?
A gold IRA is exactly what it stands for. You buy gold for your money, and you hold onto it as an investment for your retirement account. This is a hot topic since cryptocurrencies are becoming more popular, but gold has been around for millennia, while crypto is still brand new.
Ever since civilization started, people have been trading goods for gold. In Ancient Egypt, the pharaohs were buried with all of their gold, and it’s a precious metal that has stood to the test of time. Unlike cryptocurrencies which are virtual tokens that can only be used on the Internet, gold actually has a purpose in the real world.
It’s unable to corrode, which makes it perfect for coating objects and buildings. It’s a great conductor, which means it’s used in electronics. Based on these natural principles, the price is going to be high. There’s a limited amount of it, which makes it much more desirable.
Twenty years ago, an ounce of gold was worth 250 bucks. Now, that same ounce is worth 2 000 dollars. That’s a tenfold increase. IRAs of this character are becoming more and more popular since there are many crises that have occurred.
Whenever a crisis happens, the price of gold skyrockets, and the value of paper money diminishes. Of course, you can’t put all your eggs into one basket and buy only gold. The best thing to do is to diversify your assets into multiple bonds, stocks, and precious metals.
What does the situation look like for the following years?
The pandemic shifted the world, and no one was ready for it. An unexpected virus halted the entire economic force of the world, and no one knew how to handle it. This eventually got to the US printing a lot of money out of thin air to cover the damages that were done to the economy.
When you print a lot of money without producing anything else, inflation is bound to happen. A lot of experts are putting their money into precious metals as a defense against this phenomenon. You could do the same thing since there are a lot of geopolitical risks at the moment.
Should you hire a broker?
Most people don’t have the time to monitor the stock and the gold market every second of every day. Sure, you can check it out once in a while, but ultimately, that’s a broker’s job. When you’re buying gold or investing, you need a broker who goes and buys the metal and a custodian to bring your account online.
A custodian can be an association, a brokerage firm, a credit union, a trusted company, or a bank. These organizations have been tested by federal agencies, and they don’t have the option to scam you. This means that your money is going to be in the safest hands possible.
When you try to find a broker, look for a few important things. First of all, is transparency. They need to tell you all the costs without hiding any fees. The next thing is experience. They need to have a lot of experience, and you can check that online.
Credibility can easily be manipulated, but time in the market cannot. Someone who has performed optimally in the last 20 years is a safe choice. The final thing is flexibility, which means the ability to diversify your assets.