When the value of the dollar’s purchasing power begins to erode, gold is one of the highly liquid assets that every investor turns to as a safety net, as you can see on this page. As we all know, gold is scarce, making it relatively expensive to produce. This explains why it is still valuable, even after many years. It is a widely used tool for “hedging” against inflation, as its value rises as the economy declines.
Also, it is an excellent portfolio diversifier, thanks to its low volatility and low correlations to the stock market. Not to mention its liquidity, which you can easily buy and sell when it hits the spot price. Hence, many investors are including gold in their retirement accounts.
Why? Because it preserves your capital! At the same time, it is a subject for price appreciation.
So how do we invest in gold?
Gold might be rare, but investing in gold is simple. The first step? Opening a self-directed IRA. But before you start deciding whether to open or not, make sure to research its advantages and drawbacks.
While investing in gold sounds pretty good, it is still highly volatile. After all, there is a long way to go before you actually get the gains.
What Is A Gold IRA?
A gold IRA is a self-directed account made specifically for retirement. As the name implies, it allows you to make investments in gold, either in the form of physical bullion or collectible coins. If you want to start investing, a custodian will need to purchase precious metals (on your behalf) accepted by the Internal Revenue Service (IRS). This includes the requirements for a metal’s minimum fineness or purity.
The purity of gold must be 99.5% to qualify as an asset in your IRA. In addition to gold as a precious metal, you can also invest in other IRS-permitted investments like silver, which must be 99.9% pure, and platinum and palladium, both of which must be 99.95% pure.
This type of IRA is very similar to traditional IRAs (link: https://www.investor.gov/additional-resources/retirement-toolkit/self-directed-plans-individual-retirement-accounts-iras) in that they have the same contribution limits. The IRS set contribution limits at $6,000. But as you reach the age of 50 or older, you can make an additional $1,000 contribution, for a total of $7,000.
On the flip side, this retirement account gives you the ability to manage your investments yourself. As a result, you can choose which investment vehicles you want to hold and diversify them according to your financial goals and strategies. You can use a self-directed IRA to invest in a wide range of alternative assets, including real estate and even virtual currencies like bitcoin, in addition to precious metals and other traditional investments.
Furthermore, investing in gold thru an IRA allows you to take advantage of the tax breaks, depending on what account you’re considering to open:
Traditional IRAs
A traditional IRA is a type of retirement account that is tax-deferred— meaning, you don’t have to pay taxes on any gains earned from your investments until you withdraw the money once you retire. Also, once you turn 72, you’ll be required to pay for annual Required Minimum Distributions (RMDs). A traditional IRA may be a preferable option if you expect to be in a lower tax bracket in the future.
Roth IRAs
A Roth IRA is a retirement account that allows tax-free withdrawals as you pay for post-tax. This means that you will have to pay taxes while contributing to your IRA, but once you withdraw money from your IRA during retirement at a certain age, you will no longer be required to pay taxes. As a result, if you expect to be in a higher tax bracket when you retire, a Roth IRA is typically a better choice than a traditional IRA in most cases.
What You Should Look For In A Company
- Good Reputation
You should look for a company with a good reputation, followed by positive feedback from their existing (or former) clients. After all, you wouldn’t want to put your retirement fund in the hands of companies that you don’t trust. Since opening a gold IRA onlinehas been made easier for investors, take the time to learn about the companies you’re considering and read reviews to see their pros and cons before making your decision.
- Transparent
Look for a company that is transparent to its clients. This includes price transparency and genuine products. They should not charge any hidden fees and should inform clients of any costs incurred during the investment process. And, of course, their metals should be authentic and approved by the Internal Revenue Service. Check to see if they have the proper licensing and qualifications to ensure that you are not dealing with cons.
- Educational
These companies are in charge of assisting you with the initial stages of your investment, such as the setup, funding, and purchase of the investment products. Whether you’re a new investor or not, excellent gold IRA companies must strive to educate you.
Even though your account is self-directed, a reputable company will work with you to ensure that your IRA account achieves its maximum growth potential. Additionally, they should familiarize you with any technicalities that you may come across to make better decisions when it comes to managing your liquid assets in the long run.
