As a future retiree, it’s your job to accumulate wealth to live comfortably in retirement for when the time comes. It isn’t enough to rely on Social Security anymore because today’s expenses are just too high. And future expenses will be even higher if things keep going the way they are.
I’d like to help you understand the reasons why you should consider a gold IRA for retirement. This investment is a lot more potentially lucrative than you might think. Plus, it’s a different style of alternative investment that adds diversity to existing retirement portfolios.
Would you like to discover the reasons why you should consider a gold IRA for retirement? Continue reading to find out the biggest pros and cons of this investing strategy today.
Gold IRA Investing Pros
#1: Add Greater Diversity to Your Retirement Portfolio
Many investors think that if they just invest in different sectors on the stock market, they are achieving portfolio diversity. Is this true? In a sense it is, because they are purchasing stocks that operate in entirely different business sectors.
But it’s not real diversity. And do you know how you can tell? You can tell because during a stock market crash, every sector is affected. They all end up losing a lot of money during the crash. The investor ends up suffering because they didn’t have protection from true portfolio diversity.
This is where a precious metals IRA account comes into play.
You see, opening a precious metals IRA means achieving real diversity through alternative investing. When the stock market crashes, the value of gold and other precious metals tend to increase concurrently.
We saw it happen in 2008 when the stock market was in the gutter and the value of gold went through the roof. We saw it again in 2020 when the coronavirus caused the stock market to crash temporarily. The value of gold started to rise precipitously throughout the rest of the year.
I don’t know about you, but I like owning a hot commodity that gains value while other investments fail. If you want to achieve real diversity in your portfolio, begin investing in a gold IRA as well.
#2: Gold Price Performance Has a Tremendous Track Record
This might sound crazy to you, but gold has consistently made positive returns for the past 50 years. In fact, gold has gained an average of 10% every year since 1971.
I know that seems impossible but it’s the absolute truth. And if you were to invest $10,000 in physical gold in 1971 and held it until now, it would be worth more than $1.1 million. And this is true even if you never invested another penny in gold for the entire 50 years.
I always recommend investing in gold for the long term. But if you were to attempt to time the market, there were times when you could’ve made huge gains. In some instances, you could have bought gold for the short term for like 2-3 years and made a quick 500% return on your investment.
But that’s not what I’m really here to tell you today. Even though gold has had a tremendous price performance and a great track record over the last 50 years. I’m here to tell you to buy gold consistently in a gold IRA and gain 10% compounded year-over-year.
There aren’t too many surefire investment opportunities that make a consistent 10% each year. And technically gold doesn’t actually make 10% per year. But if you hold it long enough, it makes 10% per year on average.
#3: The Increased Demand for Gold Makes It an Even More Valuable Investment Opportunity
Did you know that gold is one of the hottest commodities on earth right now? It is being bought by the metric ton by some of the largest countries in the world. And many of today’s world superpowers are stockpiling gold and keeping it in their coffers.
Guess what? Some of the richest and wealthiest men and women in the world are also heavily invested in gold and other precious metals. They are afraid that the US dollar, the UK pound, and other important currencies are on the verge of collapse.
As we know, gold and silver have acted as legal currency across the world for thousands of years. If something bad were ever to happen, owning gold and silver will help preserve and protect your wealth as well.
These are the reasons why so many countries and investors invest in these precious metals so heavily. Not only is gold gaining value because of the increased demand. It’s also becoming more popular because the world is in a massive period of instability and people are afraid.
The biggest countries in the world heavily invested in gold right now include:
- United States
#4: Gold IRA Tax Loopholes
More than anything else, investors love opening precious metals IRA accounts because of the tremendous tax loopholes. It’s rare for the IRS to create legal tax shelters, but they did in the form of the self-directed IRA.
When you open a gold IRA, you can do so via a traditional IRA or Roth IRA. A traditional IRA gives you access to tax-deferred investing. This means you can invest pretax income in this account. And you aren’t responsible to pay taxes until you take distributions at retirement age, which is 59 ½ years old.
A Roth IRA is funded with money that was already taxed by the IRS. The big benefit of this type of account is you get to keep all the proceeds to yourself. Since the money was taxed prior to depositing it into the account, everything earned in here is yours to keep.
Gold IRA Investing Cons
#1: Investors Are Forced to Pay for Gold Storage
Were you hoping to buy precious metals for your IRA with the intention of storing them in a home safe? According to the rules set forth by the IRS, storing gold at home isn’t allowed.
Why is it against the rules?
Cheating and manipulation is the first thing that springs to mind. An IRA account holder can say that they own a specific amount of gold. But they could easily lie about it without having an intermediary company verifying their account holdings.
What does this mean for investors?
It means they need to find a reputable IRA custodian with connections to the best gold depositories. In this situation, they can store their gold in a reputable facility in a segregated or co-mingled vault. And if the IRA custodian has a solid connection with the depository, they may even get a halfway decent deal.
On average, investors must pay roughly $100 per year for co-mingled storage in the top storage facilities and depositories around the world. Or if they prefer segregated storage, they’ll pay roughly $150 per year on average. This gives them the privilege of having their gold stored in a segregated vault all their own.
Ultimately, this is an added expense that has a negative impact on an investor’s overall bottom line.
#2: Gold IRA Investing Is a Long-Term Strategy and It Isn’t Conducive to Short-Term Trading
This con may or may not be a negative depending on your overall wealth accumulation strategy. Many people are happy steadily investing in silver, gold, platinum, and palladium while allowing their wealth to accumulate over the long term.
As an example, since 1971 the value of gold, on average, has increased by 10% per year, which is astonishing. But this is an average price. It might take years before the price of gold starts moving in a positive direction again.
It’s also possible that you may have purchased gold and it decreased in value right after you made the investment. You might get stuck holding the bag for a long time before the gold price eventually recovers. And the price definitely will recover, which history has proven time and time again.
But that may not be what you’re after. Let’s look at the 2020 Covid-19 related financial market crash as an example.
When stocks decreased in value from anywhere from 35%-50% or more in Feb-March 2020, the value of gold soon increased. During this time, the price of gold went from roughly $1400-$1500 to $2000 an ounce before it pulled back again.
Taking advantage of this quick price movement isn’t easy within a gold IRA account. The account isn’t really set up for short-term trades or day trading. Keep this in mind as an investor and make sure you fully understand your overall financial strategy.
At this point, it’s pretty obvious why you should consider opening a gold IRA account for retirement. This investment strategy provides so many benefits that it’s hard to keep track of them all.
In particular, it’s a great strategy because of the immense demand. It has fantastic tax benefits to grow your wealth much quicker. It has an excellent track record and it’s the ideal hedge against inflation.