The United States dollar has progressively lost value compared with other major currencies since the end of 2002. The U.S. dollar is declining largely because the United States imports far more goods than they sell abroad – especially oil – and must borrow to close the gap. In addition, higher interest rates in Europe and elsewhere make those countries’ currencies more valuable and attractive to investors. The recent downgrade by S&P of the American credit rating is expected to put more pressure on the U.S. dollar and U.S. financial markets.
The impact of a sliding U.S. dollar on an individual’s retirement savings can be dramatic. In general, a lower dollar boosts prices for imported clothing, machinery, parts, technology, chemicals and the like making living in the United States as a retiree more expensive. This could also lead to a cycle of inflation since the American consumers purchasing power will be reduced. For example, if you’re counting on $45,000 a year in today’s dollars to cover expenses in retirement 20 years from now, you may find that you’ll need closer to $70,000.
So what can someone with retirement funds do to protect their hard earn retirement savings? One way is to increase your retirement assets exposure to international stocks, bonds, foreign currency, foreign real estate, and precious metals.
Using a Self Directed 401K Plan, the self-employed individual or small business owner with no employees would be able to protect his or her retirement portfolio from a falling U.S. dollar. By re-allocating ones retirement portfolio into different asset classes, such as foreign real estate or foreign currency, an individual would generally be in a better position to deal with a sliding dollar. In sum, the purchase of foreign assets and/or precious metals would likely help protect ones retirement assets against a falling U.S. dollar. With a Self Directed 401K Plan, an IRS approved qualified retirement plan is established. The self-employed business owner would serve as the trustee of the Plan providing the individual with “checkbook control” over his or her retirement funds.
In a time where the U.S. dollar it at a historically weak point, the Self Directed 401K Plan offers retirement investors with an easy and quick opportunity to increase their retirement funds while protecting the retirement assets from a sliding U.S. dollar. In addition, a Self Directed 401K plan will allow you to borrow up to $50,000 for any purpose, make Roth contributions, while requiring minimal administrative attention. Moreover the Self Directed 401K plan account can be opened at any local bank.
In a time where the U.S. dollar is projected to continue to weaken, the Self Directed 401K Plan offers retirement investors a level of asset diversification and far greater control over his or her retirement investments.