Do you own a Keogh retirement plan and are wondering how to make the most of it? Do you want to know if (and how) you can invest in recession-proof physical gold bullion (or any other precious metal) through this account? This page will have all your answers.
Established in 1962 thanks to the efforts of Representative Eugene Keogh, a ‘Keogh Plan’ is a tax-advantaged pension plan designed for self-employed workers or unincorporated business entities.
Not all self-employed persons can establish a Keogh Plan. Independent contractors, for instance, cannot open a Keogh. Rather, they are only available to self-employed individuals that own an unincorporated business.
Keogh Plans come in both defined contribution and defined benefit varieties. The defined contribution Keogh is set up as either a profit-sharing or a money-purchase plan. The defined benefit Keogh operates much like a traditional pension plan, with the caveat that it is self-funded.
Keogh Plans are notorious for complicated paperwork, but remain a viable option for high earners who are self-employed. Establishing a Keogh Plan does not inhibit your ability to contribute to an IRA.
If you are self-employed and have a Keogh, you are considered an employee for rollover purposes. This means that you are allowed to rollover part or all of eligible rollover distributions into a self-directed IRA. This is considered a tax-free rollover between like accounts.
In other words, a Keogh Plan distribution that is subsequently rolled into a self-directed IRA is not counted as income. However, if the rollover distribution is paid directly to an IRA holder, typical withholding limits (20%) apply. You can avoid this requirement by instead choosing to execute a direct rollover.
Here is a table that illustrates how a Keogh plan compares to other retirement vehicles.
|Plan Type||Sponsorship||2019 Contribution Limit||Roth Option?||Allow Gold Stocks?||Allow Gold ETFs?||Allow Gold Bullion|
|401(k)||Private Employer||$19,000 / $25,000||Yes||Maybe||Maybe||No|
|Solo 401(k)||Self-employed||$19,000 / $25,000||Yes||Yes||Yes||Yes|
|Keogh Plan||Self-employed or Unincorporated Employer||$56,000||No||Maybe||Maybe||No|
|403(b)||Government or Non-profit Employer||$19,000 / $25,000||Yes||Maybe||Maybe||No|
|457(b)||Government or Tax-exempt Employer||$19,000 / $25,000||Yes||Maybe||Maybe||No|
|SIMPLE IRA||Private Employer||$13,000 / $16,000||Yes||Yes||Yes||Maybe|
|SEP IRA||Business Owners & Self-employed||$56,000||Yes||Yes||Yes||Maybe|
|Profit Sharing Plan||Private Employer||$56,000||No||Maybe||No||No|
|Money Purchase Plan||Private Employer||$56,000||No||Maybe||Maybe||No|
|SARSEP||Private Employer||$19,000 / $25,000||No||Yes||Yes||Maybe|
|Traditional IRA||Individual||$6,000 / $7,500||Yes||Yes||Yes||No|
|Precious Metals IRA||Individual||$6,000 / $7,500||Yes||Yes||Yes||Yes|
|Thrift Savings Plan (TSP)||Government or Military||$19,000 / $25,000||Yes||No||No||No|
("Maybe" indicates that gold investment options are at the discretion of the plan provider. For instance, some 401(k)s offer gold mutual funds or ETFs, while others do not.)
Keogh plans are able to invest in the same instruments as 401(k) plans and standard IRAs (traditional and Roth). This means that they are able to include:
In short, this means that you cannot invest in physical gold bullion (or any other precious metal) through a Keogh Plan. The simplest way to invest in gold through a Keogh is to purchase stocks in gold mining companies, or to purchase a mutual fund that includes mining company stocks. This is referred to as buying “paper gold.” There are also gold ETFs (GLD) and mining ETFs, which provide indirect access to investing.
So-called ‘paper gold’ stocks are the shares of companies that mine, produce and explore for gold. There are literally hundreds of gold stocks to choose from, and the larger companies are listed on major gold stock indices like the Gold Miners Index (GDX) or the BUGS Index (HUI).
Gold stocks tend to be more risky than owning physical gold. This is because, historically, gold stocks will appreciate very quickly as the spot price of gold rises; if the price of gold falls, gold stocks tend to fall much faster.
Gold stocks are also exposed to additional kinds of risk. Some examples:
The value of physical gold has never hit zero and has retained value for thousands of years. In terms of staying power, physical gold wins hands down.
The advantage of rolling over your Keogh Plan assets into a self-directed IRA is that you are able to control the designation of your retirement funds and open up new tax-free investments – like precious metals.
In an employer-funded retirement plan, such as a Keogh, your investment options are more limited than with a precious metals IRA. Additionally, Keogh plans require the account owner to establish a vesting schedule, which means that you are only entitled to your funds after a certain length of time has passed. In terms of flexibility, the IRA wins hands down.
The other major drawback to Keogh plans is that they are more complex to maintain than a rollover IRA will be, and therefore charge higher fees.
Gold investments are simple, safe way to diversify your retirement portfolio. Gold (along with other investment metals like silver, platinum and palladium) will help protect your assets against stock market volatility and inflation.
Not only is gold a great hedge, but gold offers plenty of growth potential; in fact, many investors purchase gold for its growth prospects alone, and many analysts predict gold to continue to see gains in the future.
The total amount of precious metals in your retirement portfolio will depend on your own risk tolerance and retirement horizon. One of the best ways to set up a diversified retirement portfolio – and receive tax benefits on your precious metals investments – is to open a self-directed IRA.
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