I see a lot of ads touting gold as a good investment for my IRA. Is this a good idea?
–Jerry, State College, Pa.
I think it's a bad idea for a couple of reasons: First, owning gold in an individual retirement account (IRA) is a pain, because you can't take physical delivery of the gold. You have to set up a special IRA account and place the gold in the hands of a custodian. If you go that route, make sure the custodian is a legitimate depository institution; otherwise, you'll have to worry about whether or not your gold even exists.
Second, even though they advertise on respected TV stations or print publications, many gold dealers are out to make a quick buck by selling overpriced gold coins—or worse, selling you gold that doesn't exist. Don't fall for the slick presentations. If you should consider doing business with a gold dealer, go to your favorite search engine (Google, Yahoo, or MSN, for instance) and enter the name of the company along with the words "scam" or "rip-off." Prepare to be shocked. If you just have to own the metal, buy gold bullion, not some coins, directly from a respected financial institution.
Despite my caveats, owning gold inside or outside an IRA may be a useful way to further diversify your investments. However, do yourself a favor and own gold the easy way, by investing in an exchange-traded fund (ETF), which holds gold or a mutual fund that invests in mining stocks and/or in the metal itself.
I have some income from a side business. Can I set up a business retirement plan even though I also contribute to a 401(k) in my day job?
–Eleanor, Tempe, Ariz.
Yes, you can. In fact, anyone with income from full- or part-time self-employment can set up and contribute tax-deductible dollars to a plan for the self-employed. The best and most flexible plan to use is called a "self-employed 401(k)" or a "solo 401(k)." Most mutual fund companies and stock brokerage firms offer gratis plans that are easy to set up.
Keep in mind that a self-employed 401(k) must be set up by Dec. 31 of the year in which you want to make contributions, but you can wait until the due date of filing your return (including extensions) to make a contribution for the prior tax year. The contribution limits are generous and flexible.
For example, you can contribute and deduct up to 100 percent of the first $15,000 of self-employment income ($20,000 for those age 50 or older), or any lesser amount, or nothing at all. Higher limits are available to investors with higher self-employment income.
Finally, you can generally borrow (if you must) from your self-employed 401(k) plan. All in all, this plan offers a great way to save for retirement and on taxes, but be mindful of the Dec. 31 deadline for setting up your plan.
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