PP across 401k + IRA

[KevinW]

Both options sound sensible to me.  Actually your 401k options could be a lot worse.

IMO option 2 is better due to its lower overall expenses, and my general preference for the DIY 4x25 over PRPFX.

Two things to consider: 1) Redirect $5k/year of the 401k contributions into the rollover IRA or a new Roth.  That way a higher proportion of assets are in flexible accounts.  2) Buy a core holding of physical gold bullion.  This will free up some space in the IRA, along with the other benefits of owning actual bullion.

[moda0306]

I agree with Kevin but would stress starting a roth.

In general, it diversifies your tax options in retirement.  

There are also no RMD's.

Most importantly (in some peoples' minds) you can remove your contributions tax/penalty free at any time.

These contributions are invisible to creditors, FAFSA, lawsuits, the IRS (haha)... but all still distributable in case of emergency or opportunity.

I definitely think with your IRA/401(k) heavy allocation right now, you probably should be maxing out a Roth first and foremost, then filling up the rest.  Roth IRA's are preferred as Roth 401(k)s rarely are that flexible in removing funds you've contributed.

[AdamA]

This might be a little simpler:

401K
$45K VFISX (SDBA)--This is a short term treasury fund through vanguard.
$45K FSEMX

IRA
$30K Treasury bonds
$30K Gold ETF

Now you're at 20% 20% 30% 30% (no big deal to be a little off).

Next:

Buy some gold coins.  Use them to sell off your gold ETF and buy more treasury bonds. 

[MediumTex]

I like option 2. 

One interesting approach would be to set up an HB PP with your current balances and then contribute your future 401(k) contributions into PRPFX using the brokerage window (leaving the original $150k in the HB PP configuration).  At the end of each year or two you could liquidate the PRPFX holdings and spread the proceeds across your HB PP to rebalance it (of course, you would also rebalance the HB PP if it hit a rebalancing band along the way).

This approach would allow you to keep using your 401(k) plan to build up your PP, but would require a lot less thought along the way of how to re-allocate everything (since your 401(k) contributions are pretty large relative to the size of your overall portfolio).

Just a thought.

[AgAuMoney]

I agree with Kevin but would stress starting a roth.
...
I definitely think with your IRA/401(k) heavy allocation right now, you probably should be maxing out a Roth first and foremost, then filling up the rest.  Roth IRA's are preferred as Roth 401(k)s rarely are that flexible in removing funds you've contributed.

Agreed, with one caveat...  Highest priority is to get any 401(k) match offered by your employer.  I've never seen a valid reason to skip getting the match.

Then max out the Roth IRA.  And if married, make sure your spouse does the same or do a spousal Roth IRA.  That's $5000 per year per person plus make up contributions if you are old enough and all of it totally independent of the 401(k) limit.

So the money fills the match requirement of the 401(k), then overflows to fill up the Roth IRA(s) then overflows to...  what?

Forget the regular IRA.  You used that contrib limit in filling up the Roth(s).  And you can get the deduction in the 401(k) if a deduction is worthwhile for you.  If you are already in a low tax bracket (because of deductions or whatever) then consider Roth (post-tax) 401(k).

So that leaves the option to put more into the 401(k) to max that contrib limit.

But do you really want to max out the 401(k)?  For me, I put only enough into the 401(k) to get the match.  The rest I put into a regular account just to keep control of the funds.  Oh, I did get enough into the 401(k) to get well over $100,000 because then I could take out the maximum 401(k) loan -- the best way to get control of 401(k) money while still employed.

[AdamA]

Having additional flexibility via the Roth(s) might make these simplifications unnecessary.

Absolutely...the only problem will be getting enough money into the Roth to make it useful for rebalancing purposes. 

I have a (irrational) fear that (i) I'll mistakenly buy counterfeit coins and/or (ii) I'll lose them.

Just buy one or two at first to get used to it. 

I'll contemplate Adam226's and MedTex's suggestions.

MT's suggestion of using PRPFX is, IMO, very good.  HB talked about diversification throughout various institutions so that if, say, Brokerage Firm A has a problem, you don't lose your shirt b/c you still have assets with Brokerage Firm B. 

PRPFX is also not a bad idea in a regular brokerage account.  It's relatively tax efficient, and you can make small monthly contributions without a fee if you enroll in their AIP.

All in all I think you have very good options (as good as anyone else). 

Everyone has a few issues when it comes to implementing the PP, and almost no one can keep everything 25% x 4 in strictly tax advantaged accounts. 

[MediumTex]

I've been thinking about the physical gold option prior to KW's suggestion.  I understand the benefits, but it is the one thing in the PP which gives me some pause.  I recognize that it is entirely a mental/emotional barrier, and I'll eventually get over it.  I have a (irrational) fear that (i) I'll mistakenly buy counterfeit coins and/or (ii) I'll lose them.

I would try to buy some coin of some kind, just to get your mind more fully acquainted with what has so far just been one more investment abstraction in a world of investment abstractions.

I remember when I bought my first gold.  It took me quite a while to fully absorb what I had in front of me.  I can be a bit of a slow learner, so my experience is not necessarily instructive, but it took me years from my first gold purchase to feel like I fully understood what gold was all about.  I think it is near impossible to develop a healthy relationship with gold solely through an ETF-like instrument.  It would be like a man saying that he understood all of the mysteries of women and love because he had been exchanging letters with a woman for a long time but had never actually spent any time with her (or even seen her in person).

I would tell such a man that there is undiscovered country in his quest that he has probably not even dreamed of (and that would probably reduce his enthusiasm for letter writing as the primary form of intimacy).

[Tortoise]

I would try to buy some coin of some kind, just to get your mind more fully acquainted with what has so far just been one more investment abstraction in a world of investment abstractions.

I remember when I bought my first gold.  It took me quite a while to fully absorb what I had in front of me.  I can be a bit of a slow learner, so my experience is not necessarily instructive, but it took me years from my first gold purchase to feel like I fully understood what gold was all about.

I know what you mean. To hold gold in one's hand is to hold treasure. That's really what it is: treasure. Whenever I hold a gold coin in my hand, I feel humbled by the fact that this thing--this heavy, gleaming little piece of history--will be around a lot longer than I will. It will never tarnish, never rust. Centuries from now, it will still be around in one form or another. Gold coins that have been salvaged from ancient shipwrecks are just as bright and yellow as the day the ship sank.

The first gold coin I bought was a 1 oz. American Eagle. I can't even remember how many times I took it out to admire it and just let my imagination run wild, the way I used to when I was a kid.

We are so used to being surrounded by the cheap and transitory that I think seeing and touching a treasure as permanent as gold is initially a bit of a shock. But it's a good shock--a healthy, instructive stock--that far too few people experience in this world of fiat money.

[smurff]

All the gold that has ever been mined is still around today.  It's been melted and remade innumerable times. The gold in a 1/4 oz American Eagle or Canadian Maple Leaf might have been held by Ghengis Khan, Attila (the Hun), Henry VIII, Paul (the apostle), Abraham, Cleopatra, or Catherine The Great. When you look at it like that you realize you are in interesting company, and it's something to think about when you hold it in your hand. There is a sense of connectedness, of permanence, of something so important to the universe that it was here before you arrived, and will be here when you're gone.

Not so with an ETF. Buy the coins.

[HB Reader]

Although the hassle factor (storage, slightly bigger spreads, etc.) is a little greater, I would definitely buy and hold a few gold coins.  Counterfeits are extremely rare -- after all, that is one of the main reasons gold became popular as money.  I bought my first gold coin -- a 1947 Mexican 50 peso (1.2 oz) -- in 1974.  It was my first real foray into the investment world and I was hooked.

Of all the components of the PP, the most difficult for me to buy initially was long-term Treasury bonds.  Looking back on things, it was kind of ironic since I ended up working at the Treasury Department. 

In 1974, gold bullion ownership in the US was still technically illegal (the restriction was removed effective 12/31/1974), so you had to buy what were considered numismatic coins if you wanted to own gold.  Since there was no good way to define a "numismatic" coin, the Treasury simply based the determination on the strike date.  At that time, it meant any coin struck before 1959.  That precluded buying the South African Krugerrand which was first struck in 1967.  A major problem (from the Treasury's viewpoint) was that in the early 1970's in Mexico they were continuing to strike the 50 peso coin with 1947 on it.  Thus the 1947 Mexican 50 peso tended to have the lowest premium of all the "legal to own" coins (although older British gold sovereigns were also popular). 

A few years later when I started work at the Treasury, one of the lawyers who had worked on the change in regulations in late 1974 told me that the "re-strike problem" was one of the enforcement complications that many in the Department were glad to be rid of and that it had helped usher through the end of the broad ownership prohibition.       

[AgAuMoney]

All the gold that has ever been mined is still around today.  It's been melted and remade innumerable times.  ...
Not so with an ETF. Buy the coins.

Agreed.

FYI, the mint claims U.S. law requires the gold in American Eagle gold coins must come from newly mined sources in the U.S.  http://www.usmint.gov/downloads/mint_pr ... d.pdf  but I don't see that requirement in the law except for first spouse and buffalo coins.  http://www.law.cornell.edu/uscode/31/5112.html o_7_A  and q_4_A (also allows gold from territories and possessions and puts a time limit on mine to treasury).

Silver American Eagle coins used to be similar (bullion had to come from the strategic reserve or be mined in the U.S.) but the law had to be changed because the strategic reserve was exhausted and U.S. mines were not keeping up with demand.  http://www.law.cornell.edu/uscode/31/5112.html#l_6_C