With the advent of 401K plans and Individual Retirement Accounts (IRAs) in the 1970’s, United States citizens have embraced the tax advantages associated with these ultra-popular programs. Literally trillions of dollars are sitting in these retirement accounts. The hope of the holders of these instruments is have enough wealth after their earning years to live comfortably. As of June 30, 2023, IRA and 401K assets totaled a whopping $23.2 Trillion. With another $13 Trillion in Defined Benefit, Defined Contribution, and Annuity plans. Approximately 75% of all Retirement Account funds are invested in the Stock Market.
It has been said many times that the memory of the American people is very short. Couple that with the fact that the United States equities markets have not experienced a significant correction since the subprime mortgage crisis. An event that brought the world to within hours, not days, of complete financial collapse in September 2008. The Dow Jones Industrial Average had peaked eleven months earlier and continued down until February of 2009. In all, it took seven and one-half years to for those that tragically rode the market all the way down to recover their losses. 401Ks and IRAs that were invested in individual stocks and mutual funds lost fifty percent of their value in sixteen months, and it took another six years to make up the losses.
This came on the heels of the Dotcom bust in January 2000 which took nearly three years to bottom out, and another five years to get back to even. Fourteen years is a long time for any market to go straight up without a correction. Without a doubt it has been an historic and enjoyable ride. How long will last? How much higher will it go? When the correction occurs, how deep will it be?
These are all questions that many investors and financial analysts have, but no answers are available. We have methods to forecast probabilities and admittedly are not an exact science. One index is the Buffet Indicator. This index is a ratio of the total United States stock market to United States GDP. The index is successful in measuring overvalued equities markets that primed for corrections. The following chart is the legend of the findings.
To put the findings into perspective Warren Buffet suggests that you should consider purchasing stocks if the index is less than 100% and ideally between 70 – 80%. History would seem to support his beliefs. Just before the Dotcom crash the Buffet Indicator reached a peak of 144%. It took another seven years to cross over the 100% barrier just before the Global Financial Crisis at a paltry 111%. More recently, the indicator hit an all time peak just shy of 200% at the end of 2021. The S & P 500 fell 19% in 2022, and the Nasdaq fared much worse with a 33.1% drop.
The index has predicted three market crashes in a row, and now sits precariously at 177%. It is each investor’s determination whether their age and financial soundness will allow them to weather another storm that may take years and dollars away from their retirement. There are ways to protect these assets before landfall of the next stock market disaster.
There is a very poorly advertised provision within the Internal Revenue Service rules and regulations which allows retirement funds to be backed by Gold, Silver, and Platinum family metals. Precious Metals are a perfect alternative investment which helped millions of Americans weather the previous crashes rather than losing valuable time and money by riding them out. The process is a Precious Metals IRA Rollover which is accomplished without penalty from an existing IRA or 401K utilizing a portion or all the funds within.
GMRgold has a dedicated department for Precious Metals IRA Rollovers and help throngs of Americans protect their retirement savings each year. There is never a bad time to buy Gold and Silver to protect your assets. But some times are better than others.Learn More About Precious Metals IRA