401(k) plan assets continue to vaporize due to bank failures, bailouts, high inflation and dollar devaluation. Companies need to take proactive steps to protect employees’ retirement savings. 401(k) Gold Group helps companies and employees protect their 401(k) plans from catastrophic losses with physical gold.
6 Crucial Reasons to Safeguard 401(k) Plans with Gold
Written by Luji Shofu - Founder, 401(k) Gold Group.
401(k) plans and investors lost 23% of their 401(k) savings in 2022, according to Fidelity Investments, the largest provider of 401(k) plans in the United States. The conglomerate reported a decline in both the average 401(k) plan balance and individual retirement account (IRA) balance in the fourth quarter of 2022.
While the average 401(k) plan balance saw a rise during the quarter, it ended the year down by 23% from 2021. Similarly, the average IRA balance fell by 20% in 12 months. Unfortunately, experts are predicting an inevitable market crash soon.
Here are the 6 crucial reasons companies must protect their employees’ 401(k) plans from a catastrophic market crash with physical gold.
Inflation is the rate at which the general level of prices for goods and services is increasing, and it is measured by the Consumer Price Index (CPI). Core inflation has risen with the CPI increasing by 17.67% since 2019, the highest rate of inflation in 40 years.
Inflation erodes the value of 401(k) assets. For example, if core inflation is at 17.67% (which is negative), and the rate of return on a 401(k) is minus 5% (-5%), the rate of return is negative 22.67%, (-22.67%). That means $100,000 in any retirement account would only have the purchasing power of $77,330.
2. Dollar devaluation
Devaluation is a decline in the value of a currency relative to other currencies. This occurs for a variety of reasons, not limited to changes in interest rates, economic growth rates, and government policies.
The Federal Reserve provided trillions of dollars in economic stimulus and relief measures in response to the COVID-19 pandemic. As of September 2021, the U.S. government has allocated more than $5 trillion in COVID-19 relief spending, which includes direct payments to individuals, expanded unemployment benefits, small business loans, and funding for vaccine distribution and COVID-related research.
a. Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 was signed into law on March 6, 2020. This act provided $8.3 billion.
b. The Families First Coronavirus Response Act, 2020 was enacted on March 18, 2020. Most of this legislation's $192 billion of funding went to small businesses and state and local governments.
c. The Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 was signed into law on March 27, 2020. The CARES Act provided the largest amount of funding, $1.8 trillion, to combat both the healthcare crisis, as well as the ensuing economic fallout.
d. Paycheck Protection Program and Healthcare Enhancement Act of 2020, went into effect on April 24, 2020. This provided $484 billion in increased funding.
e. Coronavirus Response and Relief Supplemental Appropriations Act of 2020, was signed into law on December 27, 2020. This provided $900 billion in funding that impacted 2021 healthcare expenditures.
f. The American Rescue Plan was passed on March 11, 2021. It provided $1.9 trillion in additional stimulus funding for vaccine purchases, testing, contact tracing, research and development, and manufacturing of pandemic-related medical supplies.
In 2022, the federal government collected $4.90 trillion in revenue but spent $6.27 trillion. It spent $1.38 trillion more than it collected, resulting in a deficit. At the end of 2022, the government had $30.93 trillion in federal debt that can never be paid off.
These policies have increased the money supply in the market, devaluing the dollar tremendously. This is why 401(k) plans will continue to lose value and never recover.
3. Astronomical Fees
401(k) plan fees are the charges associated with managing the plan, including investment management fees, administrative fees, and other expenses. As a general rule, total plan fees typically range from 0.50% to 2.00% of assets under management (AUM) per year.
Here is a breakdown of the different fees and their typical ranges:
(a). Investment management fees: These fees are typically between 0.10% and 1.00% of AUM per year, although some actively managed funds may charge higher fees.
(b). Administrative fees: These fees are typically between 0.10% and 0.50% of AUM per year, though larger plans may have lower fees due to economies of scale.
(c). Individual service fees: These fees vary widely depending on the service provided and can range from a few dollars to several hundred dollars per transaction.
These exorbitant fees are charged even as 401(k) asset values evaporate. It's important to note that these fees add up over time and significantly deplete the amount of money available in a 401(k) plan.
4. Bank Failures and Bailouts
A bank failure ensues when a bank is unable to meet its financial obligations and is forced to close its doors. In the past week, the banking sector has been in turmoil, with high-profile bank collapses sending shockwaves through the economy.
Silicon Valley Bank, which held a massive $209 billion in assets, became the second-largest bank failure in U.S. history. Its collapse was closely followed by that of Signature Bank just two days later, which held $110 billion in assets, making it the third-largest bank failure in U.S. history. Silvergate Bank suffered a bank run with deposits from cryptocurrency-related firms dropping by 68%.
Once more, the federal government provides billions of dollars of financial support to the banks to prevent further economic instability. There has never been a time when the federal government paid back individuals whose 401(k) funds got stolen by Wall Street banks.
5. High Taxes
A 401(k) plan is a retirement savings plan offered by employers to their employees. The plan allows employees to contribute a portion of their pre-tax income into a tax-deferred investment account, which can grow over time and provide income in retirement. The problem is with 8 market crashes since 1980, high inflation and other economic disasters, 401(k) plans continue to lose money unabated.
As a reminder and cautionary note, 401(k) plans are a tax-deferred investment vehicle. It simply means taxes have never been paid on the earned income. A 401(k) investor may owe the IRS as much as 30% tax upon receiving a voluntary or forced distribution. A market crash depletion of the funds is not taken into consideration.
6. Market Crash
Since all 401(k) portfolios primarily hold traditional mutual funds, stocks and bonds, the stock market’s volatility will always have a direct negative impact on these financial assets.
Market crashes are an excruciating blow to hardworking American families that lose their 401(k) savings. When the markets crash, Americans are stripped of an enormous portion of their life savings, leaving them in a state of hopelessness. This demoralizing experience shatters their very being and deprives them of their dignity. Years of backbreaking work and self-sacrifice are instantaneously obliterated, causing unimaginable trauma.
The good news is that there is a solution: 401(k) Gold Group, Inc.
401(k) Gold Group, Inc. helps corporations and their employees protect 401(k) plans from catastrophic losses with physical gold. The company's gold-backed 401(k) plans help preserve retirement savings from market volatility without changing the plan.
As a store of wealth and a multi-faceted hedge, gold has outperformed many major asset classes while providing a prosperous performance in both rising and falling markets. Companies with 401(k) plans may choose to include gold in their retirement portfolio to hedge against losses in other assets.
According to data from the World Gold Council, the price of gold increased by over 25% in 2020 alone, while the price of silver increased by over 47%. Clients with precious metals-backed accounts have experienced a cumulative 85% growth in value since 2016. It’s a simple historical record.
It's not just corporations and their employees that can benefit from 401(k) Gold Group's services. Sole proprietors can now own physical gold and silver bars through the company's gold-backed solo 401(k)s. Pension plans can also hold tangible assets like gold and silver, something that was never possible before.
In conclusion, bank failures, bailouts, high inflation, dollar devaluation, the Federal Reserve printing trillions of dollars, a looming market crash, and post-COVID ramifications are a recipe for disaster for 401(k) plan assets. As 401(k) plan assets continue to vaporize, companies need to take proactive steps to protect their employees’ retirement savings. Diversifying their portfolios into tangible assets like physical gold could reduce exposure to risky assets and may help mitigate loss.
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401(k) Gold Group is a leader in the precious metals industry.
To find out more, visit https://401kgoldgroup.com/