Planning for future retirement can be difficult and confusing, especially in this economy. How do you make sure there is enough money to live off of in the future and protect yourself from inflation all at once? The uncertainty leaves a good quantity of people feeling lost and stressed out.
There are ways to protect your wealth while selecting investments and planning for the future. A method that has been gradually growing in popularity is the Gold IRA. More and more Americans are choosing this method of investment to protect their retirement savings.
IRA Vs Gold IRA
Table of Contents
An Individual Retirement Account (IRA) allows you to save for retirement in a way that protects your growth from taxes. It allows you to be prepared for sitting back and enjoying your time at home with no more work to worry about. For most people, a pension or social security won’t be enough to live your later years comfortably. That is why it’s important to invest in a retirement account. But what type?
Breaking it down to basics, there are three types:
- Traditional: With a traditional IRA, each contribution is taken from your pay pre-taxes. This lessens your taxable income each year. No taxes will be applied to the funds until they are withdrawn.
- Roth IRA: With this type, you pay taxes on what is going in, instead of what is coming out.
- Rollover IRA: Rollover plans allow you to transfer funds from one retirement plan into the individual retirement account. If you had a 401(k) in your previous place of work, you are allowed to roll it into various different IRAs. Here you can roll over into a gold IRA.
Gold IRAs are tax-advantaged investment vehicles that allow you to choose what you invest in. The IRS specifically allows self-directed investors to choose gold, silver, platinum, or palladium to invest in. These accounts can only invest in the actual physical commodity, such as bars and coins.
How Does a Gold IRA Work?
Most commonly, these accounts are rollovers from other existing retirement plans, including 401(k)s, 403(b)s, other IRAs, and more. This process can normally be done tax free, protecting your tax advantaged assets. Visit https://www.kingoldjewelry.com/bishop-gold-group-review/ to learn about businesses that can help with the rollover process.
Once you have a company you can trust to help you with the process, rollovers are fairly quick and painless. Once the account is funded, you get to choose which bars and coins you are investing in. Once you have made your choice, the metals you purchased will be shipped to a precious metal depository of your choice. Your investment will be held there for the duration of your investment.
Gold IRAs are governed by the same rules as regular ones:
- Investing in collectibles is not allowed
- Maximum annual contribution is $6,000- or $7,000 if you are over 50 years old
- Must be managed by an IRA custodian
It is important to note that these accounts have required minimum distributions once you reach the age of seventy-two. If you wish to distribute assets before the age of fifty-nine and a half, penalty fees will be charged. Click Here to learn more about what makes a gold IRA special.
Gold IRA: Pros
There are plenty of benefits to investing in gold for retirement. Some of which include:
- Portfolio Diversification
- It is a great way to diversify an investment portfolio. Bonds and stocks lose value in a market crisis or crash, but metals hold fairly steady value. It might even increase during times of economical distress.
- Inflation Protection
- As mentioned, the metals tend to rise in price when other investments decline. It makes for great protection against inflation, when cash or other assets lower in value. Gold has a long history if jumping in price during times of crisis. Both in the 1970s and in 2008 when inflation jumped and stocks plummeted, precious metals continued to gain value.
- Tax-Advantaged Investing
- To invest, you don’t have to sell your retirement assets and start over. Instead, you can transition the assets into a gold IRA tax free. Selling a 401(k) can rack up taxes and penalties, making you lose money instead of securing it. Rolling the assets over into metals instead, helps secure it without the charges. Make sure to consult with a financial adviser to make the process as seamless as possible.
- Full Investment Control
- Self-Directed assets give you complete control over your investments. You get to decide which depository to store it in and who the custodian will be. You choose what kind you want to purchase, whether bars or coins, and when to buy and sell. You can even decide if you take the money out in cash or actual bars and coins.
- Self-Directed assets give you complete control over your investments. You get to decide which depository to store it in and who the custodian will be. You choose what kind you want to purchase, whether bars or coins, and when to buy and sell. You can even decide if you take the money out in cash or actual bars and coins.
Gold IRAs: Cons
While investing in precious metals has several silver linings, it’s not always the perfect solution. Some cons to consider are:
- Limited Access
- As with most IRAs and other retirement accounts, there is limited access to funds. If you are in sudden need of cash flow, you won’t have immediate access to the account. Most of these investment accounts have severe penalties for withdrawing money early. Be sure to consult a tax advisor about the situation so you can avoid incurring too many fees and penalties.
- The Gold is Stored Elsewhere
- You don’t get to store these metals at home. Like with any IRA, the assets have to be managed by an approved custodian. If having the metal at home is so important to you, when it’s time to take distributions, you can get them in physical bars and coins. If you were really determined, you could become an IRS approved custodian, but that takes a massive amount of time and money. Better to just go with the system and store it when you are allowed to take it out.
- Not a Forever Investment
- Despite the fact that gold is seen as a long-term investment, once you reach 72, the IRS requires you to take distributions from the IRA. If you want to continue storing it as an investment, you can liquidate the assets and keep it as coins or bars in your home or in the bank. Some investors see precious metals as an investment that runs for decades, which does clash with being required to take out distributions.
- Fees and Expenses
- Set up fees, storage fees, account maintenance fees, and so many more expenses are a part of having investments- gold included. It’s good to shop around and look at the different fee structures. Consider one that charges a flat fee that isn’t based on how much you own. It’s considered better to choose gold when you have at least $25,000 you want to invest. Before that amount might end up making you lose money instead.
