Investment of precious metals such as gold for an Individual Retirement Account (IRA) must adhere to strict IRS regulations, which include working with a precious-metals dealer, custodian, and depository.
As with other IRAs, precious metals IRAs come in two flavors – traditional or Roth. No matter which one is selected, contributions must be made with pretax dollars while distributions will incur taxes upon their taxed distributions.
1. It’s a hedge against inflation
If inflation is an issue for you, diversifying a portion of your portfolio into gold may provide essential protection from rising prices. While stocks and bonds might seem attractive at first glance, their purchasing power over time decreases when factoring inflation in. Gold acts as an inflation hedge by maintaining purchasing power over long periods.
One analysis suggests that gold returns are positively correlated with consumer price index (CPI) gains and can help investors navigate economic changes as its price tends to rise during times of economic instability.
Gold investment may provide an attractive alternative to Treasury investments with lower yields; however, Treasury inflation protected securities (TIPS) can create tax events during semiannual coupon payments, and are only beneficial if the Federal Reserve’s rate hike schedule has successfully reduced inflation.
2. It’s a store of value
Many investors view gold as an asset they can rely on during times of economic instability and recession, due to its tendency for increasing in value over time.
While this may not always be the case, history shows that many are drawn to gold when they feel stressed about the economy or money supply. Gold’s tangible nature and limited supply make counterfeiters difficult to replicate copies.
Gold can be an excellent long-term investment, but it’s essential that it fits within your overall financial plan and goals. Before adding gold to your portfolio, consult a financial advisor; SmartAsset offers free tool to connect you with trusted advisors in your area that can create plans tailored specifically to you and your situation. Get started right away by requesting your free investor kit now.
3. It’s a diversifier
Gold can be an attractive asset for investors because its uncorrelated with other assets during times of economic volatility, making it a reliable diversifier that can reduce portfolio volatility.
Establishing a physical gold IRA can be a great way to diversify your retirement account, but be wary of any associated fees such as account setup/maintenance/storage fees or markups on precious metal purchases.
To minimize fees, it’s wise to partner with a provider offering low-cost options for buying and selling precious metals, with transparent pricing and multiple investment opportunities such as gold coins and bars for retirement savings. Augusta Precious Metals stands out in this regard and has long been helping investors secure their retirement using gold’s power.
4. It’s a tax-deferred investment
Gold investments may provide high returns, yet you must factor in some associated fees to your calculations. Gold IRA companies usually impose annual custodian and storage fees as well as markup charges on precious metal purchases.
If you decide to invest in a gold IRA, make sure that you select a reliable company with transparent pricing, buyback programs and an established history of customer education. Avoid companies using high-pressure sales tactics as these may push products that aren’t suitable for you into your account.
Addition of a precious metals individual retirement account (IRA) is a great way to both diversify and take advantage of tax benefits in retirement savings. Traditional and Roth precious metals IRAs both operate similarly, where contributions are tax deductible while withdrawals in retirement will be tax free; it should be noted, however, that precious metals are non-liquid assets and could take time before realizing any investment gains.
