“I’ve heard a lot of talk about physical assets and diversifying savings,” we hear people saying, “and I know it’s important to diversify my retirement savings with something like a physical gold IRA. But what is a gold IRA, exactly?”
A gold IRA is a particular type of retirement account that holds physical gold assets within it such as gold bars and coins. They exist both on paper and physically. Gold coins and bars in an IRA, for example, are held in a secure storage facility designed for precious metals. A gold IRA brings with it many of the advantages of a physical asset, along with the tax advantages of an IRA.
We all want to have a comfortable retirement, and - for most people - that means saving a lot of money over a long period of time. But currency (upon which most retirement accounts are based) tends to lose its value with inflation and other national economic stresses. It may feel like it’s impossible to be sure that you keep all your hard-earned wealth long enough to retire on it.
If you’re worried about your retirement money losing value, what can do you to give yourself the best possible chance of the retirement you planned? One option many retirement savers use is to diversify their savings—and gold IRAs are one great way to hedge your savings against economic forces, because gold IRAs are a fundamentally different type of asset than those built on currency. Physical assets in your portfolio have the potential to offset losses that come with economic volatility.
Of course, that doesn’t mean the value in a gold IRA won’t fluctuate, as any asset does. And it doesn’t mean this type of IRA is the best solution for everyone. Like any other investment, gold IRAs come with their own pros and cons. In this article, we’ll go over both the advantages and disadvantages of gold IRAs, so you and your personal legal, tax and financial advisors can decide if this investment is right for you and your financial goals.
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Overview of 2023 Best Gold IRA Companies
| Overview of the Best Gold IRA Companies | ||
|---|---|---|
 | Augusta Precious Metals
| See offer → |
 | Goldco
| See offer → |
| | American Hartford Gold
| See Offer → |
 | BIRCH GOLD GROUP
| See Offer → |
What is a Gold IRA?
Let’s start by breaking down exactly what a gold IRA is. This type of individual retirement account holds gold instead of more traditional assets such as annuities, stocks, or bonds. Specifically, a gold IRA needs to be a self-directed IRA.
Physical gold wasn’t always an investment option for retirement savers who were looking to take advantage of an IRA. But the Taxpayer Relief Act of 1997 expanded the list of assets that could be included in an IRA to include gold and some other precious metals such as silver, platinum and palladium. This is the same act that established the Roth IRA. Americans loved it because it gave them more choices – more autonomy and control over their own retirement investments.
Since the passing of that act, retirement savers have been able to enjoy the benefits of an IRA while also enjoying some of the benefits of investing in a physical asset. Gold IRAs have been a popular method of diversifying savings ever since.
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Why a Gold IRA
Many assets are available that can be used to store value. Other assets may be included in a self directed IRA. Why is gold so popular?The use of gold as a symbol of value has a long and rich history. Since at least the 5 thcentury BC, gold coins have been used to display wealth in decorations and accessories. The more gold that you could afford to show, the wealthier you were.We can only guess why gold has been so popular for thousands of centuries. It is highly reflective and attracts attention. Gold is relatively rare so accumulating a large amount of it will show your influence. It is malleable and can be made into coins. However, it's durable enough to keep its shape for many years.
Even in fairytales around the globe, gold is used to show wealth. Gold is often found in pirate chests with sparkling jewels. Decorators use it to add a touch of class and sophistication to their homes and buildings. It is also the best conductor of electrical current in the world and an essential for electronic devices of all types, including some that are vital for the medical sector and other sectors.Gold has been a precious metal for thousands years, regardless of the reasons. For a long time, gold was used to back American currency (the "gold standard") but that's no longer the case. Due to this history, people are more inclined to store their savings in physical gold rather than other paper assets.
Which is the strongest benefit of a Gold IRA?
What is the purpose of a gold IRA? You can store your hard-earned money in a Gold IRA for many reasons. From being able own a physical asset with intrinsic value, to receiving tax benefits by owning the asset through your IRA. We will cover the strongest arguments for starting a Gold IRA, and why retirement investors might choose to diversify with this type of retirement account.We'll discuss a few cautionary factors that you should consider before rushing into a gold IRA. No asset is perfect and no one knows what the future holds and how that will impact the assets in your retirement account. Many people still believe that a gold IRA will help them retire the way they want to.
Check out: The 12 Best Gold IRA Companies for 2022 with Reviews
Benefits of Gold as a Physical Asset
Gold is a physical asset that many people find valuable. It gives them peace of mind. Paper assets like annuities and stocks have done well in the past for many investors. It can be comforting to know your money is invested into something tangible. You could actually pick it up and hold it. A physical asset with inherent value, just because it exists in its natural form.A physical asset is unlikely to be worthless. Physical assets will always be useful, no matter what the state of the economy is.Gold has many practical and real-world uses.
Gold: An Asset that is in Demand
Gold in its many forms is more valuable than just being rare and expensive. Gold is malleable, sturdy and conducts electrical current well. It also resists corrosion. Gold is used in many fields from medicine to manufacturing, and these characteristics are just a few.Many electronic devices in your home are made of gold. Gold is used in computers for its conductive qualities, so it's required for things like TVs and smartphones.Many devices today have computerized parts that you may not be aware of. Many modern household appliances, such as washing machines and vacuum cleaners, use computerized parts to handle more advanced features. They require gold in order to be manufactured.In the dental industry, gold is used frequently. Gold plating can be used on dentures, crowns and tooth restorations. Gold is not only biocompatible but also able to be shaped to fit the mouth of a patient. Gold is also highly resistant to corrosive elements, making it ideal for fixtures that are meant to last.Gold is in demand for these and other reasons, and it will likely remain so as long as the manufacturing processes continue. This demand can be good for gold over time. It is also good for people who want to diversify their investments into gold in order to protect themselves against economic downturns.
Benefits of an IRA
Of course, if all you wanted was to own gold, you could simply buy it without the need for an IRA. What is a gold IRA good for, then? It was illegal to own gold at all in the U.S. for a little over forty years, but that hasn’t been true since the 1970s. Maybe partly for that reason, Americans have gotten into the habit of neglecting gold as a viable investment option both inside of and outside of official retirement accounts.
Now that gold can be owned by individuals, it’s tempting to just buy it outright, store and insure it yourself, and not worry about any retirement benefits. However, by simply buying gold outright, you could be missing out on some key features of a gold IRA.The real advantage of a gold IRA is combining the benefits listed above of precious metals themselves with the additional benefits an IRA can bring. It’s important to take advantage of all the benefits possible when it comes to retirement savings. We don’t know what future years will bring, and IRA benefits can help offset some of the risks to your retirement, not the least of which are economic stresses that happen naturally and with the changing of political parties.A gold IRA has many of the same advantages as a standard IRA like the one you might have through your employer – or may have had over the years. You can choose between many of the same types of IRA, such as a traditional IRA, a SIMPLE IRA or a Roth IRA. Depending on the kind you choose, you’ll get different tax benefits. With a gold IRA, you can also roll over or transfer retirement money from other retirement accounts, such as a 401(k). That makes it easy to add physical precious metals to your retirement savings mix.With a traditional gold IRA, you can move your income directly into your self-directed account before you pay any taxes on it. That way, you aren’t paying taxes on money you won’t see again until later in life. This has the additional benefit of lowering your total income by the amount you contribute, which can have other advantages.However, with a traditional IRA, your money will be taxed when you withdraw it from your account later in life. Many people believe they’ll be in a lower tax bracket then, and so will ultimately pay fewer taxes on their money overall. On the other hand, tax laws are susceptible to change, and it’s possible you could be taxed at a higher rate in the end.If that concerns you and you’d rather have a more predictable income when you retire, you also have the option of using a Roth IRA. A Roth IRA works the other way around—your money is taxed when you put it into the account at your current tax level, but later, when you withdraw it, you can claim your money tax-free. For some Americans, this is better, because they don’t want to see their retirement distributions eaten away by taxes at a time in life when every penny may count.
Hedge Against Inflation
You may already have some money tucked away in a savings account that is based on currency (the number of dollars you deposit), but many professionals advise against storing your wealth in pure currency, such as in a checking or savings account, for one big reason: inflation.
We’ve all seen the effects of inflation over the course of our lives. A candy bar that once cost 25 cents now costs $1.50. The same kind of sticker shock applies to the money you have saved. If you simply held all of your savings in currency within a savings account in that span of time, you’d only be able to buy 1/6th as many candy bars as you could have purchased when you started saving. But what if you instead decided to save the candy bars themselves, worth the same amount as the total of your savings?Well, they’d probably have rotted by the time you are ready to retire. That’s why candy bars don’t make a good store of value. But what if you saved physical gold coins and bars instead? Now, the appeal becomes obvious. Storing your hard-earned money in some kind of physical asset makes it more likely that you’ll retain at least part of the value of that money, even as inflation does its dirty work.
Diversify Your Savings
Many people choose to spread their wealth across several assets, regardless of how they decide to store it. This is called "diversifying." It's because if one asset drops in value, other assets may not be affected by the same decline.
It's not guaranteed that one asset will perform better or worse than another. Historically, certain assets have performed better than others. You can also find out more about us on our website. When the market has been in a downturn, these assets have performed well. They provide a financial cushion for those with money invested in them during difficult times.
Gold has historically held its value, or even increased in price, during economic turmoil. The housing crisis in 2008, with its economic fallout is well-known. Many people lost large sums of money and the country went into a deep recession for over a full year. Many people are unaware that the price of gold rose during this period. After the financial crisis, the spot price of gold rose 27% since October 9. The th The date of the 2007 to March 6 The th , 2009. Gold's price can also fall. Many professionals advise diversifying your investments and storing money in different assets. So, if the value of one asset drops, you can still protect your other assets. You and your tax, legal, and financial professionals will need to work together to create a plan for you. Physical gold (and perhaps even silver) can provide the ballast you need to help you keep more money in your retirement.
What Is a Gold IRA’s Biggest Risk?
There are both pros and cons to anything and, despite the numerous advantages of gold IRAs, they are no exception. There are some things you’ll want to be aware of before you decide to roll over your life savings into a gold IRA.Many of these factors are also present in similar accounts, so no matter what you decide to do with your retirement savings, make sure you’ve done your research.
No Early Withdrawals
Just like any other IRA, you won’t be able to make early withdrawals from your gold IRA without paying a penalty to the IRS. If you decide you need to access your money before you turn 59½ years old, you’ll have to give up 10% of the amount when you withdraw your gold and liquidate it.Fortunately, early withdrawal IS an option if you have some kind of financial emergency in your life. But it’s best to avoid an early withdrawal if at all possible, because that 10% penalty can add up to quite a lot depending on how much you have saved. The closer you are to retirement and the larger your accounts are, the more you’ll be penalized.
Potentially Higher Fees
Because gold is a physical asset, there are certain special considerations you have to take into account. Your gold must be physically stored at a gold depository—by IRS rules, you aren’t allowed to keep the gold used for your IRA in your personal possession (although you can still arrange for a visit to the depository to see and handle it).Of course, the depositories don’t work for free, and you’ll have to pay storage and management fees on your gold IRA. This can lead to higher fees than you might have with other kinds of retirement accounts. Some gold IRA providers (“gold IRA companies”) offer promotions that help cover some or all of the fees, but you should always ask what the fees are and under what circumstances you’ll have to pay them yourself.
Overview of 2023 Best Gold IRA Companies
| Overview of the Best Gold IRA Companies | ||
|---|---|---|
| Augusta Precious Metals
| See offer → |
| Goldco
| See offer → |
| | American Hartford Gold
| See Offer → |
| | BIRCH GOLD GROUP
| See Offer → |
Contribution Limits
It's important to keep in mind that the IRS only allows you to contribute a certain amount of your income to your IRA each year. For most people with a traditional or Roth IRA, this is going to be a limit of $6,000 or $7,000 if you’re 50 years of age or older.You also cannot contribute more than your taxable income for any given year, which may be applicable if you are semi-retired and making less than $6,000 a year but want to contribute from your savings. This probably won’t apply to most Americans, but it’s good to know, just in case.Fortunately, there are no limits on how much you can roll over from another IRA into your precious metals IRA. If you already have money saved up in a standard IRA from your employer, you can easily roll it over into a precious metals IRA with the help of a precious metals IRA provider.
You May Need Help Navigating Gold IRA Paperwork and Ordering Gold Products
There are a few steps to set up a gold IRA. It isn't difficult, but you will need to follow a certain procedure. Gold IRA specialists (often referred to as "gold IRA companies") are familiar with the intricacies of setting up and maintaining such an account. Gold IRA providers work with specialized precious metals custodians, and they have usually already vetted and identified their preferred companies and facilities.
Gold IRA companies usually have an order desk to help you choose gold or other precious metals that fit your investment strategy – or, at least, can shed light on what gold products are most popular among retirement savers.
A good company offers assistance with the paperwork, and remains on your side to be your personal resource after your purchase is complete (which we call a "trade") These companies offer transparent pricing and educational materials to help you better understand the behavior of precious metals in history under different economic conditions. Although gold IRAs are common, traditional financial advisors don't often provide their clients with information on them.
Due to the fact that there is no regulation in place for gold IRAs, it has been reported that some companies use questionable tactics to pressurize potential customers. One scenario involves a company promising excessive amounts of "free silver" upon opening an account. A promotional benefit, especially one that is as big as the "free" silver offers you see out there, has to be paid somehow. Otherwise the company would not be able to stay in business. This could mean the gold price you pay for is too high. As they say, there is no free lunch. If something seems too good to true, then it is probably not.
Another questionable scenario is when a company claims that it will have a one-time special or that a financial disaster is imminent. These tactics are meant to instill fear that you will miss out on a deal or get into trouble with your money. These tactics are likely exaggerations, and they're probably not true. You may want to look for a better company if you feel pressured by anyone into buying a gold IRA.
There are many reasons to open a Gold IRA, if you think it is right for your situation. Some of these reasons were just mentioned above. Buying a Gold IRA should form part of a comprehensive financial plan for retirement, or outside of a retirement fund. This strategy was carefully formulated by you and your financial advisors. A reputable, experienced, and trustworthy gold IRA company will help you achieve your goal.
Is a Gold IRA Right for Me?
No one can decide for you whether a gold IRA is the right solution for your personal financial goals. A certified financial planner may be able to give you viable suggestions about the best way to fit a gold IRA into your strategy and plan, but the final choice is yours.It's a good thing, then, that there are so many resources available for you to teach yourself more about physical self-directed retirement assets such as gold IRAs. The most important thing is to do your due diligence on precious metals—do all the research necessary, so you understand the pros and cons. Furthermore, be sure you carefully vet any gold IRA specialty companies, custodians, and storage facilities you use to carry out your strategy.
This article is a good start to understanding and making use of physical gold in your retirement plan, but don’t stop here—keep looking online, ask lots of questions when you connect with providers, and maybe even find out what other people are saying about gold IRAs and the gold IRA companies that serve investors like you.
Information is the greatest tool you have to learn about gold IRAs, vet gold IRA companies, and improve your chances of realizing the kind of retirement you expected when you began saving.
Free Guide: Gold IRA Dealer Lies: Get This Guide & Learn to Avoid Them!
See also: 12 Best Gold IRA Companies in America for 2022 With ⭐⭐⭐⭐⭐ Reviews