Precious metals are regarded as a safe haven investment that safeguards a portfolio during economic or political upheavals. These precious metals such as gold, silver, palladium and platinum can be considered volatile in their own rights. However, they retain and grow in value when used as long term investment assets.
To this end, we can safely say that investing in a gold individual retirement account (IRA) is a sure-fire way of securing one’s financial future. Although the traditional IRA is not a new concept, you can’t use it for gold or precious metals investment. That is why gold IRA is designed especially for people who want to invest their retirement savings in precious metals.
In this article, we will help you understand how investing in gold IRA can help secure your financial future.
Understanding Gold IRA
Although most commonly known as Gold IRA, the term Precious Metals IRA is a more comprehensive term. This is because this account allows the holder to invest in any of the approved precious metals which include gold, silver, platinum and palladium. So whenever we say ‘precious metals’ we are referring to any of these 4.
This type of account is a special kind of self-directed individual retirement account. A self-directed IRA allows the holder to invest in a wide range of non-traditional assets which include real estate, crypto and precious metals. This is what differentiates it from the conventional ones. Apart from that, they have the same rules such as contribution and distribution limits.
Due to the fact that this type of account requires that you buy and store precious metals in its physical form, you need a custodian. This custodian may be a bank or a brokerage firm and they are also the ones that will manage the account for you. But bear in mind that you will have to make the decisions on what to invest in and how much.
How Much Should You Invest In Your Account?
Financial experts advise that you invest only between 5 to 10 % of the funds for your retirement in a precious metal IRA. It is best to be conservative with the amount you put into this account for the following reasons:-
- Your portfolio needs to be well diversified. This means that you shouldn’t be reckless with your investment by ‘putting all your eggs in one basket’. You need to invest in several assets to spread the risk.
- Although precious metals are known historically to have long term value, they do not have the advantage that other classes of assets have. They do not have the prospect of growing dividends through reinvestment. Precious metals IRA does not yield dividends or interests, you only make profit when you sell at the right time. So for people who want to keep growing their retirement savings, other classes of assets are needed. Check out information on how to set up a retirement account on Metal Resource to understand this concept better.
- There is the argument of precious metals not being the safe haven assets that they are often touted to be. Investment gurus argue that these metals have been known to have experienced the same volatility as stocks on occasions. So spreading your retirement funds across different classes of assets spreads the risk. For example when stocks fall, gold prices rise and when stocks rise, they may fall. But whichever way, you are hedged on all sides.
How Can The Account Be Funded?
As you contemplate setting up a gold IRA, you need to know that this account cannot be funded directly with coins or bullions that you already have. This is mainly because of government regulations on the types of bars and coins that can be purchased.
This therefore means that you have to fund the account from scratch and then purchase your preferred precious metals. Bear in mind that the physical commodity cannot be accessed until you get to the age of retirement. This should prepare you for how long you have to wait to cash out on your investment.
Below are different ways you can fund your account:-
- By Contributing Cash– This is actually the easiest way of funding your account. So you pay in cash directly into it and then the cash is used for the purchase of the precious metals.
- Rollover – This is best for people who have another kind of retirement plan such as 401(k). All you need do is simply transfer the funds in the account to the gold IRA.
- IRA Transfer – This is for those who have any kind of IRA no matter the assets that it holds; it could be securities, cash or gold. If you want to use the assets to fund a new gold IRA, all you need is to fill out paper work and have the assets transferred to the new account. When this is done, you can go ahead and liquidate the assets so that you can use the funds to buy your preferred precious metal.
You can check out this site for more on rollover and IRA transfer: https://www.irs.gov/
There is a lot of information about your retirement savings, investments and IRAs that has to be processed before you proceed on opening a gold IRA account. We believe that we have provided some of the basic information that you need. Thorough research is necessary because you do not want to be left out in the cold in your golden years. So do your due diligence now so that you can retire in peace.