What is a Money Purchase Plan?

A money purchase plan is a type of defined-contribution retirement plan that is similar to a profit-sharing plan, except that the contribution amounts are fixed rather than variable. Employers are required to make annual contributions to each employee’s account regardless of the company’s profitability for the year.

Contribution Limits

An example of a Money Purchase Plan is let’s say there is a contribution of 5% of each eligible employee’s pay. This means the employer contributes 5% of each eligible employee’s pay to his separate account annually. Contributions must be made whether or not the business makes a profit. In 2016, subject to cost-of-living adjustments, the overall contribution limits are 25% of an employee’s compensation or $53,000, whichever is less. The plan may be used along with profit-sharing plans for maximizing annual contribution amounts. The amount of contributions and gains or losses of an account after an employee retires determines a participant’s benefit.

Types of Gold You Can Invest in Through a Money Purchase Plan

A Money Purchase Plan investment choices are very limited to what your plan provider makes available to you. The plan can offer the following types of investments:

  • Individual stocks
  • Individual bonds (corporate and government)
  • Options
  • Mutual fund shares
  • Exchange Traded Fund (ETF) shares

You cannot invest in physical gold bullion (or any other approved investment metal) through a Money Purchase Plan.

Does Gold and Precious Metals Qualify for Profit Sharing Plan? Retirement Plan Contribution Chart