A gold Individual Retirement Account (IRA) is an investment vehicle that operates just like a traditional stock/bond-based IRA in terms of its structure and possible tax benefits. The important difference is that a gold IRA is a type known as a self-directed IRA. Investors can use their retirement funds to buy actual gold that is then held by a third party known as the “custodian.” The precious metals IRA custodian takes actual possession of the gold and keeps it safe in a secure and insured facility. The investor is purchasing an actual physical thing, which cannot be diluted or devalued.
Investors can roll over or transfer funds from an existing retirement account or use their current assets to purchase gold for a gold IRA retirement plan. For example, it’s easy to perform a 401(k) to gold IRA rollover when an investor switches jobs or leaves an employer. A gold IRA is simply another way to diversify a portfolio, especially for investors who believe another recession is imminent and is likely to occur during their retirement years.
Benefits of the Gold IRA
Investors who create a gold IRA have similar motivations as those who buy gold in a non-retirement account or who purchase gold coins or bars and store them at home. They might be worried about inflation taking a toll on their assets, or concerned about domestic or international upheaval disrupting stock markets. Historical data shows gold prices typically move along with inflation, so $1,000 of gold today will buy the same amount of goods 20 or 30 years from now even though nominal prices have increased significantly by then. Gold is also in finite supply, a stark contrast to the U.S. government which creates new dollars ad infinitum.
Gold is also valuable for its many industrial uses, and the finite amount of gold means its value will only increase as industrial demand rises. For example, gold is of course used by the jewelry industry, but the precious metal is also used for smartphones, solar panels, gaming consoles, and tablets. Demand for all of these products will only continue to rise, which will further the steady increase in gold prices and benefit investors’ gold IRAs.
With a gold IRA, investors can see growth in their account balances that is not dependent on financial markets, which is an inherently more stable way to achieve growth. Gold’s price is much less volatile than other financial assets, so it provides some needed “peace of mind” in turbulent times.
There are many misconceptions surrounding the purchasing and storage of gold and how to properly use gold as an investing tool. Some people believe purchasing gold and storing it is exceedingly difficult, but it’s a very common practice that only takes a few days. With a gold IRA, the custodian of the account will handle the shipping and storage details, there’s no need to store the gold at your residence or in a safe deposit box at your bank. Gold is a very “liquid” asset, meaning it’s very easily bought and sold without complications.
Another common misconception among the investing public is that gold buyers are all speculators – meaning they buy and sell gold in short timeframes to make a profit. While of course there’s some of this type of trading, gold is meant as a long-term investment that offers diversification and stored value. Within an IRA it also protects a nest egg from any economic or geopolitical crises that might occur.