Due to the current unstable and chaotic economy, more and more people want to make investments for their future. One matter that is causing increasing concern among investors is whether the assets they invested in will hold their value and provide them with a decent income once they retire. Many investors are now opting for a gold retirement plan in order to improve their prospects for a comfortable retirement.
What’s Wrong With Retirement Funds?
Most people’s retirement funds are kept in either an IRA (individual retirement account) or a 401k, which is a plan sponsored by their employer. These funds are mostly used to invest in traditional assets such as bonds, stocks, mutual funds or cash. All of these currency-based assets are negatively affected by the volatile stock market and economy. Nobody wants their retirement funds to be dependent on any uncertain external factors like inflation, because then their assets will not be guaranteed safety in later years.
Another problem with currency-based assets like bonds, stocks and mutual funds is that they don’t represent actual wealth that you hold. On the contrary, the wealth is of someone else, and the paper is just a promise to pay you its value at some time in the future. If the promise is not kept, or if the value of the assets has dropped to nothing at the time you claim the promise, the paper is totally worthless.
Cash can be deemed a tangible asset. A cash IRA, however, poses another problem. A cash IRA uses the US dollar – a fiat currency – as its investment tool, and the prospects of the dollar haven’t been so bright throughout history: in fact, the dollar has lost 97% of its purchasing power since the early 30s. As a result, a cash IRA is unlikely to provide you with adequate income in your retirement because the dollar value keeps dropping.
Why Investing in Tangible Assets?
Investors should opt for a gold retirement plan – a plan based on tangible assets instead of paper. Tangible assets are proven to be able to maintain their value and stay independent on promises from governments or companies. Since 1997, the IRS has allowed investors to put gold or other precious metals into their IRAs. You can invest in precious metals using any type of IRA, but only a self-directed IRA can offer you the whole range of options, including keeping physical gold.
Keeping physical gold in your IRA can be quite beneficial compared with keeping traditional assets. Firstly, you won’t have to worry about inflation, which is a nightmare to every retiree who can do nothing but watch the value of their savings eroded. Gold, on the other hand, is an effective tool to hedge against inflation. Unlike the dollar, gold has the same purchasing power as it had in the 20s – you can buy a high quality suit with an ounce of gold then, and you still can today. Gold is what you should add to your retirement savings portfolio.
Besides, since gold is not affected by the unstable market, it is considered a much safer investment than bonds, stocks or mutual funds. Gold is deemed the safe haven for investors because its performance, as proven in history, has been inversely correlated to that of other assets.
Another benefit of a gold IRA is the tax advantages that come with it. Gold in IRAs, unlike other assets in a traditional IRA, is not taxed. Thanks to the changes in tax codes and IRS limitations, a gold IRA is becoming more and more desirable from the tax point of view. What makes a gold IRA even a better choice is the quick and easy setting up process, since you only need to deal with your custodian, who handles most of the administrative issues on your behalf.
How to Add Gold to IRAs?
You can add gold to your IRA using different methods. If you already own a traditional IRA or a 401k, you can choose to ‘roll over’ it into a gold IRA. In the case of a 401k, however, a rollover into IRA requires that you are currently working for a different employer from the one that holds your plan, or if you qualify for distribution for other reasons. If you think the rollover process is too complicated for you, just opt for a brand new self-directed IRA.
No matter which method you choose, the first thing to do is picking a custodian, or administrator, to take care of your account. You can easily find custodian services at most big banks, but I advise you to use the services of a company specializing in gold investment. The choice of custodian is important because they will deal with the transfer of funds on your behalf, including the forms and paperwork.
The second decision you should make is the dealer who will supply your gold or bullion. As to what to buy, the choice is entirely up to you, but make sure you learn IRS restrictions first. Gold bullion bars must be pure 24-karat, and coins’ purity must be at least 99.5%, such as American Eagle and Canadian Maple Leaf. Numismatic or collectible coins are not allowed. Gold proof coins are allowed, but it is advisable not to buy them because they carry a high premium that could reduce your investment profits.
Once deciding what to purchase, you will have the custodian pay the dealer on your behalf, and transfer the purchased gold to a secure storage depository approved by the IRS. It is against the IRS rules to keep the gold yourself until you meet distribution qualifications from your IRA. The amount of gold you add to your IRA each year is limited by the IRS, and you can add gradually up to the maximum contribution amount, but otherwise you can just watch your investment grow without doing anything.
It is very simple to set up a gold retirement plan, which can ensure your financial future. You can rest assured that your retirement years will be comfortable because you can, from now, take control of your finances instead of depending on external factors that you cannot control, and protect your assets.