Home » 401(k), China, Inflation, Investing, Retirement

401(k) Planning: The Best Way To Supplement Your 401(k)

1 September 2009 8 Comments

Many of my readers participate in their employers’ 401(k) plans.  In fact, for many, the 401(k) is the only way they touch investing.

First, the 401(k) is a great vehicle to take part in, especially for the company match.  I strongly encourage it.  With that said, are there ways to supplement your 401(k) plan with regards to your complete investment picture?  Are there ways you should diversify from your 401(k)?  Yes and yes.

Supplemental Investments

Most 401(k) plans are heavily tied to the direction of the U.S. economy.  If you read my investing philosophy, you will see a few areas that I think we should have significant exposure for the coming years.  The two major areas are inflation protected investments and China.

Additional Diversification

In addition to adding better international diversification as well as diversification from the US dollar (with inflation protected investments), you can also get some “taxation diversification”.  The 401(k) provides a tax advantage on the front-end, by deducting your contributions from your taxable income.  You can supplement your 401(k) by opening up a Roth IRA which provides a tax advantage on the back-end, when you withdraw your money.

Plan Of Action

  1. Open a Roth IRA account with Zecco. They have a great service with extremely low fees
  2. Fund your account when you open it and add money once or twice a year – in 2009, your maximum contributions allowed are $5,000.  If you can max that out, great; if not, don’t sweat it.  The important thing is to do regular contributions (like you do for your 401(k).
  3. Get China exposure by targeting the following ETFs: FXI, AIA, PGJ.  Buying ETFs is much easier than individual stocks.
  4. Get inflation protection with the following gold ETFs: GLD & GDX.  Also, consider a position in the silver ETF: SLV.  I would also recommend an energy ETF such as USO & DIG.
  5. Add to these positions each time you fund your account.  This will provide the same dollar cost averaging as you get in your 401(k).

Your 401(k) is a crucial part of your financial plan, but I strongly recommend supplementing it as detailed in this post!


  • recession_day said:

    IRA money is touched by inflation like all money, so as long as your growth rate is greater than the inflation rate you are making good progress.
    The difference it is after tax money invested to grows tax free, and is tax free when you take it out during your retirement age @ 59 1/2. However, Traditional IRA is tax deferred money that grows tax free, and taxed when you take the money out during retirement. The key here is do you want your tax money to work for you, or do you want to not pay tax when you retire.

  • Pornhub said:

    I am a new user of this site so here I saw many articles and posts posted by this site,I taken more interest in some of them hope you will give more information on this topics in your next articles.

  • blogc2011 said:

    You can supplement your 401(k) by opening up a Roth IRA which provides a tax advantage on the back-end, when you withdraw your money.click here