What Are the Benefits of a Gold IRA?
If you’ve ever read mainstream financial media, you’ll notice that gold doesn’t seem to get mentioned all that often as a major investment asset. When the gold price takes off, of course, then the media is full of articles about how great gold is doing, but that’s too late for most people who could have benefited from gold’s price growth.
Because writing about gold doesn’t bring in as many clicks or as much ad revenue as writing about the next hot growth stock, gold too often gets short shrift. But while many advisors and financial pundits may ignore gold, that could mean missing out on the many advantages that investing in gold can bring.
As you work towards building a well-diversified investment portfolio, it can help to make sure you know all your options, especially when it comes to gold. Whether you’re interested in rolling over existing retirement savings into a gold IRA or just making direct cash purchases of gold, we’re here to clear up any mystery around the benefits of investing in gold.
Precious metals like gold have numerous advantages as part of a well-diversified portfolio, and tax-advantaged retirement accounts do too. Putting the two together can result in a powerful tool to help you achieve your financial and investment goals.
5 Advantages of a Gold IRA
Gold IRAs have numerous advantages for savers, both those nearing retirement and those earlier in their careers. The diversification that gold gives you may help you adjust the risk profile of your portfolio and may help you minimize losses.
Investors who put gold into their portfolios during the 2008 financial crisis saw their investments strongly outperform those who kept their assets solely in stocks. And those portfolios that held gold continued to grow stronger after the crisis hit its lowest point, in many cases for years afterward.
Let’s take a more detailed look at the advantages of a gold IRA.
1. Gold Can Help Portfolio Diversification
A diversified portfolio may mean thinking outside the box of investing in stocks and bonds, which is what many Americans are most familiar with. Concentrating your investments in one place also concentrates your risk. Ever heard the saying, “Don’t put all of your eggs in one basket”?
“Don’t put all of your eggs in on basket”?
By diversifying your portfolio with gold, you can ensure that your assets aren’t completely at the mercy of Wall Street for their performance. If financial markets take a downturn, if bond markets become illiquid, if stock markets crash, those traditional investment assets may all perform poorly.
Alternatives like gold IRA investing can leave a portion of your portfolio protected during challenging economic times, helping you diversify and shift risk away from financial assets and leaving a portion of your portfolio protected during those times when the stock market experiences weakness. Very often, the weaker the stock market and the economy perform, the better precious metals perform, potentially making them ideal assets to protect your portfolio when a recession is on the horizon.
2. Protection Against Market Fluctuations and Volatility
Physical gold acts as a hedge against dips in volatile markets. The boom and bust of the business cycle is all but a certainty, with stock market crashes and recessions occurring with unfortunate regularity.
Gold has acted as a hedge against other assets. Unlike paper assets like stocks and bonds that can become worthless as the companies that issue them fail, gold has always been worth something, and has remained in demand for thousands of years.
3. More Control Over Your Investments
Investing in a gold IRA also can provide you with a greater element of control over your assets. For many people who may save for retirement through an employer-sponsored 401(k) plan, the options available to them are often limited.
That’s why so many people roll over assets from a 401(k) account to an IRA account, because IRAs generally offer more investment options. And with a gold IRA, the options for IRA investing become even greater.
By opening a gold IRA, you can gain an extra element of control over your investment portfolio, as you are the one who determines what types of gold or silver you invest in.
A great advantage of having a gold IRA is that assets can be transferred easily and without tax consequences among retirement accounts. So someone who wants to roll over a portion of a 401(k) account into a gold IRA can do so relatively easily. And if that person decides in the future to sell some of those precious metals assets to buy into stocks or bonds, that type of transaction can be done too.
With the control over your investments that you get from a gold IRA you can:
- Help diversify your investment portfolio;
- Give yourself greater peace of mind;
- Ensure that the decisions you make will directly impact your retirement and financial well-being.
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4. Potential for Gold Price Growth
There’s a dirty little secret that mainstream financial firms don’t want you to know about: Gold is the best performing asset of the 21st century. In fact, it’s grown significantly more than stock markets have.
But you’ll still see stocks recommended for asset growth rather than gold. Why? Well, there are two potential reasons:
- Nostalgia about the 1982-2000 stock market boom. That was a period of unprecedented growth, with stock markets growing around 17% per year on average. But we haven’t seen growth like that since then, and we may never see growth like that again.
- Many financial firms make their money off fees associated with stock trades, asset management, etc. They don’t make money selling people gold because people hold gold for the long term. Plus some investment firms don’t offer gold custodial services.
Financial advisors and stockbrokers want to be able to charge for each trade, plus take a small management fee every year for each type of asset you own. But if you own gold for years and years, they can’t charge you trading fees because your assets are safe, secure, and not moving.
While gold investment may be bad for some financial firms, it’s good for you because your gains aren’t being nickeled and dimed to death through fees.
With a gold IRA you’ll generally end up paying a few hundred dollars a year in custodial and storage fees. But compare that to the 1-2% annual fee you would likely pay to a financial advisor to manage your assets, which is on top of all your other expense ratios, and you see that fees on your gold investments could end up lower than those on conventional financial assets.
Traditional advisor fees can be death by a thousand cuts, but a gold IRA may eliminate that and keep more money in your pocket.
With a gold IRA, you can benefit from gold’s stability, take advantage of future price growth which can sometimes be substantial, and still have immediate access to your money should you wish to sell your gold or transfer your wealth into other assets.
5. IRA Tax Advantages
Investing in a gold IRA offers the same tax advantages as a conventional IRA. You can invest in gold with pre-tax dollars (or post-tax dollars with a Roth gold IRA), roll over existing retirement assets with no tax consequences, and defer taxation until you decide to take a distribution.
And just like with contributions to a Traditional IRA, annual contributions to a Traditional gold IRA can even be tax-deductible. That also means that all the same IRA rules apply to a gold IRA:
- Early distributions may incur income taxes and an additional 10% penalty;
- Required minimum distributions (RMDs) must be taken after age 73, except for a Roth gold IRA, which is exempt from RMDs;
- Annual contributions are limited to $6,500 (or $7,500 if you’re over age 50).
Rollover contributions to a gold IRA are not limited by the normal annual contribution limit, so you can roll over $10,000, $100,000, or $1 million or more from existing retirement accounts into a gold IRA, and you can do it tax-free.
That allows you to protect your retirement savings with gold without having to take a tax hit. And when you choose to take a distribution, you can choose to take it either in cash or in physical gold.
For some people, keeping gold in an IRA can even offer better tax treatment than gold held outside an IRA. That can keep taxes from eating away at your returns. Don’t underestimate the benefits of a gold IRA to allow you to use pre-tax dollars to buy gold.
Is a Gold IRA Right for You?
Gold IRAs can offer many advantages to Americans, whether you’re nearing retirement or are earlier in your career. You don’t need to put all of your assets into a gold IRA, as simply moving small percentages of investments into precious metals can reap long-term benefits.
Some people may wonder if a 401(k)or self-directed IRA is a better investment. Very often they wonder this after they’ve left an employer and still have 401(k) assets held in their old retirement plan.
When you leave your employer, you have the option to roll over your retirement savings into an IRA, which may be a good opportunity to explore a self-directed gold IRA, which offers investment diversity and assets that can be more stable through economic downturns.
If you’re interested in learning more about the IRA rollover process, it can help to familiarize yourself with the IRA rules and regulations surrounding gold IRA rollovers, which you can find in the next chapter.
Once you’re ready to start a gold IRA, or even if you have additional questions that we haven’t covered here, Goldco’s representatives can help you learn more about the options you have available to you.
With over $2 billion in precious metals placements and over 5,000 5-star reviews, Goldco works hard to make sure that anyone can benefit from owning gold. Call us today to find out why so many people trust gold to protect their hard-earned retirement savings.
