Why Invest in a Gold Retirement Plan?
During these times of economic uncertainty and higher than normal inflation, investing is very much on the minds of many people. Investors are becoming more worried about how the assets in their retirement accounts will perform and provide them with the retirement income they had hoped for. Today more than ever, a larger percentage of investors are appreciating the benefits of a gold retirement plan.
The Problem with Many Savings Funds
Most retirement funds are held either in an IRA (individual retirement account) or a 401k, an employer-sponsored plan. Most of these funds are invested in more traditional assets like bonds, mutual funds, stocks, treasury bills or even just sitting in cash. All of these, cash excepted, are affected by the volatility of the stock market, the economy and government policy. You really have little certainty about how you are going to survive financially in your later years as this can all be well out of your control.
Bonds, stocks and mutual funds are all paper assets, meaning they don’t represent actual wealth. The wealth is held by somebody else, not you, and the paper represents a promise to pay you its value, at some point in the future. If this understood “promise” is broken, or if the value has sunk to nothing at the time you claim the promise, the paper becomes worthless.
Cash however is much more of a tangible asset. The problem with a cash thought is that it uses the US dollar as its investment tool, and since the US dollar is a fiat currency it can be subject to devaluation, which can be massive. Many of us are well aware of what has happened to the dollar not too long ago, losing 97% of its purchasing power since the early 1930s. It is doubtful that a cash IRA will prove sufficient to fund your retirement, as it continues to lose value.
Why Are Tangible Assets Better
Investors do need a gold retirement plan. A plan based on hard, firm, tangible assets, not on paper, which are guaranteed to maintain their value, and are not dependent on promises. Since 1997, it has been permitted under IRS rules to invest in gold and other precious metals through an IRA vehicle. All types of IRAs can be used for precious metals investment, but only a self-directed IRA provides the entire range of options that can be available to an investor.
Holding physical gold in your IRA, compared with holding traditional assets, has many advantages. Inflation is something to be feared in retirement since as opposed to those in the active workforce, retirees are not in a position to realistically increase their income, and they can only watch as the value of their savings is reduced over time. Gold tends to be the most resistant asset to inflation. It has the same purchasing power as it had in the 1920s, as opposed to the dollar which has seen a significant drop in value.
Gold has always been seen as a much safer investment than stocks, bonds or mutual funds, which are always affected by market instability. Seen as a safe haven, which people buy when other asset classes look threatened, gold continues to hold, and increase, its value.
How to Place Gold in Your Savings Plan
There are several options available for adding gold into your IRA. If you have a traditional IRA, you can simply roll the funds over directly, to a firm that has a Gold IRA option. If your savings are in a 401k, you can only do this if you work for a different employer from the one that holds your current plan, as they still have oversight over your 401k assets. Alternatively, you can simply open a new self-directed IRA directly
Whether you use a rollover or open a new account, your first step is to select a custodian, or administrator, to manage your account. Most large banks offer administrator services, but it’s better to choose a company that specializes in gold investments specifically as opposed to the more traditional products. The custodian you choose will typically handle with the transfer of funds for you, including all the forms and paperwork.
You will also need to choose the broker from whom you will purchase your gold or bullion. The decision as to what to buy is entirely yours, but there are some IRS restrictions. Gold bullion bars must be pure 24-karat, while coins have to be of at least 99.5% purity, which does include the American Eagle and Canadian Maple Leaf, and cannot be numismatic or collectible coins. Gold proof coins are allowed, but experts advise against buying them, as they carry a high premium which comes at really no value beyond the inherent melt value of the gold itself.
When you decide on what you are buying, the custodian will pay the dealer on your behalf, and will transfer the gold to a secure IRS-approved storage depository. Per IRS rules you cannot keep it yourself, which only changes once you meet the distribution qualifications from your IRA. You can add to your gold holdings every year up to the maximum contribution if you wish.
Setting up a gold retirement plan really is very simple. These few simple steps, and having the right custodian to help you (please see our list on the main page) can set you on the path to securing your financial future.