A gold IRA is better than a traditional IRA when it comes to saving up for retirement. Here are the reasons why:
- A gold IRA provides more tax benefits compared to a traditional IRA
- A gold IRA is less volatile and has more stability
- A traditional IRA suffers from inflation, while a gold IRA withstands it
- A gold IRA does a better job at diversifying your portfolio than a traditional IRA
- A gold IRA gives more asset control than a traditional IRA
- Long term investing works very well with gold IRAs
- When markets crash, traditional IRAs crash. Gold IRAs move in the opposite direction.
- There is less risk involved when opening a gold IRA
- A gold IRA has low start up costs
Read more to understand why gold IRAs are the way to go in retirement savings.
1. A Gold IRA has Tax Benefits
Unlike a traditional IRA or a Roth IRA, gold IRAs are light on taxes. A traditional gold IRA grows on a tax-deferred basis, meaning you won’t have to pay taxes until you collect your distributions during your retirement years.
Roth gold IRAs are even better since they grow on a tax-free basis, meaning you won’t pay anything even when you withdraw your distributions at the start of your retirement.
This is especially beneficial to individuals who plan to grow their retirement savings as fast as possible, since it eliminates worrying about taxes and penalties later on.
2. A Gold IRA lessens volatility
One of the biggest issues with a regular IRA is its volatility. A regular IRA depends on price changes and stock market conditions, meaning when the market crashes, it crashes as well.
Conversely, a gold IRA relies on the price of gold and does not correlate with activities happening in the global stock market. It is much more stable than a regular IRA since it holds its value even in the event of a financial crisis or when price fluctuations occur.
3. A Gold IRA Can Withstand Inflation
According to YCharts, the US Inflation Rate is at 8.26 percent this year, which is higher than last year’s rate of 5.25 percent. These percentiles are even higher than the long-term average, which is plotted at 3.26 percent.
A regular IRA responds negatively to inflation since it decreases the purchasing value of money, which then causes the value of your investment to fall drastically.
Gold IRAs, however, do not rely on the value of money. A gold IRA relies on gold price hikes, which makes it a good hedge against the harsh effects of inflation.
4. A Gold IRA Diversifies Your Portfolio
We live in a day and age where markets crash and economies falter when we least expect them. Investing in a gold IRA diversifies your portfolio by adding a layer of protection against these unforeseeable circumstances.
Unlike paper assets, the price of gold does not correlate with global markets and economies, nor does it respond negatively to inflation. Adding a bit of gold to your portfolio prevents your retirement savings from diminishing even when your other assets are failing.
5. A Gold IRA Is Self Managed
A gold IRA is a self directed precious metal IRA, which means you are in charge of all the activities and decisions around the investment. It also gives you the authority to invest in other physical precious metals without having to worry about any penalties.
As an investor, being in full control over your assets is an essential part of investing. Having the final say in every investment decision is crucial to maintaining a sense of peace and comfort.
6. A Gold IRA Is Perfect for Long-Term Investments
Looking for the right buyer when selling your gold can be tiring and difficult. Gold, unlike paper assets such as stocks and bonds, can be hard to liquidate.
However, illiquidity isn’t necessarily a bad thing. It can be rewarding since it obliges an investor to hold on to their assets, inevitably allowing those assets to keep increasing its value gradually. Holding on to an asset and leaving it to grow is an essential part of saving up for a comfortable retirement.
7. A Gold IRA Moves in the Opposite Direction
Gold, unlike paper assets, does not react to the activities and developments that occur in global markets. Price fluctuations and crashes do not influence the price of gold, rather, it causes the price of gold to move in the opposite direction. A great example of this is the Great Recession in 2009, where the price of gold soared by around 12.8% while the rest of the market struggled to recuperate from the financial crisis.
Opening a gold IRA will serve as a protective counterbalance against market crashes and economic collapses.
8. A Gold IRA Has Low Risk
Typically, investing in stocks and bonds involves preparing for a certain level of risk that comes with it, mainly because it depends on intangible assets that are often unpredictable.
Gold IRAs, on the other hand, rely on gold, which is a physical, tangible, precious metal. Because of its intrinsic value, the price of gold has been proven to appreciate in value over time.
9. A Gold IRA Has a Low Start Up Cost
For the price of a natural commodity, investing in a gold IRA has a relatively low start up cost. On average, opening an account can range from around $50 to $300. This is especially beneficial to young individuals who want to invest but don’t have a lot of money, since it allows them to open an account and start making little deposits at an early age.
Now that we’ve discussed the benefits of gold IRA, here are some frequently asked questions to help you get a better understanding of what gold IRAs are and how they work.
Frequently Asked Questions About Gold IRAs
IRA stands for Individual Retirement Account. An IRA serves as an account where individuals deposit money to prepare for retirement, usually through stocks, bonds, and other paper assets. There are several types of IRA:
Traditional IRA: A traditional IRA is a regular IRA that charges contributions on a tax-deferred basis, which means you pay taxes only when you withdraw your distributions during retirement.
Roth IRA: A Roth IRA is the opposite of a traditional IRA. Contributions are made with after-tax money, which means you don’t have to pay taxes when you withdraw your distributions at the start of your retirement.
SEP IRA: A SEP IRA is an IRA that can be opened by small business owners for their employees. However, only business owners can make contributions.
Simple IRA: A Simple IRA works essentially in the same way as a SEP IRA, but both the business owner and employees can make contributions.
Gold IRA: A gold IRA is an IRA that allows an individual to invest in physical precious metals such as gold and silver. Unlike traditional IRAs and Roth IRAs, gold IRAs are completely tax free, meaning you won’t get taxed for any contributions you make, nor will you be charged for any distributions you withdraw.
Opening a gold IRA is a smooth process. Applying can take around 10-15 minutes, while processing and setting everything up can be finished in one business day. Funding the account usually takes up to 5 days. However, if you’re planning to do a rollover, it may take around ten business days to complete the transfer.
Starting a gold IRA investment entails choosing the right company, funding your account, purchasing your desired physical precious metals, and hiring a custodian to store your gold.
When choosing a financial institution for your gold IRA, it is crucial to look for a company that will meet your needs, will help you set up your account, will guide you in purchasing physical precious metals of your choice, and will handle your gold storage concerns.
On some occasions, a gold company already provides custodian services, which lessens the hassle of looking for an external custodian.
According to Times Union, Goldco is the best gold IRA company in 2022. However, there are a handful of gold IRA institutions that provide top-notch services to those who want to open a gold IRA. Some of these are:
- American Hartford Gold
- Regal Assets
- Oxford Gold Group
- Augusta Precious Metals
- Birch Gold Group
- Advantage Gold Group
- Gold Alliance
- Patriot Gold Group
- Noble Gold
There are also companies that sell gold bullion and physical precious metals. Some of these are:
- JM Bullion
- SD Bullion
Each company has varying fees and services. Further researching on these companies will help you determine the best provider that fits your needs and budget.
Transferring your funds from a regular IRA to a gold IRA is called a gold IRA rollover. Gold IRA rollovers are easy and they’re tax free. If you plan on doing a gold IRA rollover, contact your current bank or account administrator and have them transfer funds from your existing IRA to a new gold IRA.
You can also transfer funds from a 401k to a gold IRA without taxes or penalties, as long as you follow the IRS’s guidelines on 401k to gold IRA rollovers.
Fun fact: Another term for gold IRA is precious metals IRA. As the name suggests, opening a precious metals IRA allows you to purchase other physical precious metals such as silver IRA, platinum, and palladium.
Opening a gold IRA requires hiring an IRA custodian to store and manage your gold investments for you. While some companies allow investors to store their own gold, the legalities around this are questionable.
In order to avoid any issues or penalties, be sure to contact a custodian or a depository and have them take care of your gold for you. Delaware Depository is a leading provider of custodian and storage services.
If you absolutely want to get a hold of your assets, you can either wait until you reach 59.5 years of age before taking possession of them, or pay a 10% tax penalty to obtain them immediately.
There are no regulations or guidelines on how much gold a person can own. You can purchase and own as much gold as you want to, as long as you don’t violate any laws on gold ownership and storage.
However, physically owning gold and storing them in your own home might raise some legal concerns, so be sure to clarify that with your gold IRA company or custodian.
Once you decide to withdraw your gold IRA, you are given the choice to liquidate your investments and turn them into cash, or you can choose to have them given to you as physical gold.
You are not obligated to report anything regarding your gold investments, as long as they’re not liquidated. The government only tracks assets that are liquidated, such as cash, bonds, stocks, and other paper assets.
If you want to invest in gold, but not through a gold IRA, here are a few alternatives to choose from.
- Gold stocks: Gold stocks are mutual funds which allow you to invest in gold reserves or mining corporations, either through a broker or by yourself. They can also be added to any kind of IRA, including gold IRAs.
- Investing in other physical precious metals: As mentioned earlier, a gold IRA can also be called a precious metal IRA, which means you can invest in other precious metals such as silver, platinum, and palladium. However, keep in mind that the value of these precious metals are still outperformed by physical gold.
- Trading: Contrary to popular belief, you can actually trade in gold. A few gold assets that can be traded include spot gold and gold futures.
Conclusion: Should You Get a Gold IRA?
No matter how stable gold may be, investing in a gold IRA will still have its fair share of risks. These may be caused by circumstances which are ultimately out of our control, such as sudden price drops or public distrust.
Risk will always be a driving force in the world of investing. A smart investor understands this, and therefore does not focus on how to expunge risk, but rather how to minimize it in the most efficient, cost-effective way possible.
Opening a gold IRA today could potentially be the best investment choice you would make in your life.