Diversify Portfolio with Gold Backed IRA Account


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On July 3, 2014
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Summary:

Diversify Portfolio with Gold Backed IRA Account

Nowadays, investors prefer to own a diversified portfolio, so they try to invest in as many different types of assets as possible: from stocks, bonds to mutual funds. Although these traditional investment choices have been quite rewarding in the past, these days, they have given investors sleepless nights because of their little returns.

Retirement PortfolioAs a result, a lot of investors have switched their attention to gold and other precious metals as additions to their retirement portfolios. Metals have always been a popular investment choice because of their opportunity for both growth and security and as of today, they have been more popular than ever, especially for people fast approaching retirement.

Why Choosing Gold for Retirement Portfolio?

Adding gold to one’s retirement portfolio brings many advantages, such as:

  • Growth: history has proven that gold can sustain its growth in value. This explains why gold is a popular way to pass on wealth from one generation to another in a family.
  • Diversification: because of their negative correlation to stocks, gold is preferred when it comes to diversifying one’s portfolio. The addition of gold to a portfolio of traditional investments such as stocks and bonds, as a result, can significantly reduce risk and volatility.
  • Asset Protection: thanks to the reduced risk, gold is considered a great way to protect portfolio assets.
  • Hedge Against Inflation: because gold price often goes up with the cost of living, gold is a perfect tool for hedging against inflation.
  • Supply versus Demand: in the past few years, the demand for as well as the price of gold have increased a lot thanks to the increased wealth of many emerging markets.

Gold Backed IRAs: How Do They Work?

The IRA (Individual Retirement Account) is already popular to some investors. These accounts have enabled investors to put aside funds and let them grow on a tax deferred basis until withdrawal since the time they first appeared in mid 70s.

There are two ways to set up a gold backed IRA: as a traditional or a Roth IRA, which features the same tax-related benefits as other types of IRA accounts have. For instance:

  • Traditional IRA

Traditional IRA allows investors to deduct some or all of their annual contribution, and the gains in the account are allowed to grow without suffering from tax. This can greatly compound the growth of assets over time.

  • Roth IRA

Roth IRA does not allow investors to deduct their annual contributions. On the contrary, both the gains in the account and the withdrawals from the account are tax free. As a result, this is very beneficial to retired people whose life depends on a fixed income without suffering from any income tax obligation.

For both types of IRA, investors are able to contribute a certain amount each year, which is limited by a maximum annual level. For instance, this limit in 2014 is $5,500 for investors aging 49 or under, and $6,500 for those who are 50 or over 50 years old.

Allowed Metals

Gold IRA for Retirement PlanThe rules that govern the investing activities in Gold backed IRA are set by the IRS (Internal Revenue Service). In particular, the IRS decides what is allowed to be placed into your account. This limitation is because not all types of metals are approved by the IRS for inclusion in a self-directed IRA.The IRS allows the following types of gold for inclusion in an IRA account:

  • American Eagle coins
  • Australian Kangaroo Nugget coins
  • Canadian Maple Leaf coins
  • Austrian Philharmonic coins
  • Credit Suisse – Pamp Suisse Bars .999
  • U.S. Buffalo Gold Uncirculated coins (not including proofs)
  • Bars and rounds manufactured by a NYMEX/COMEX approved refiner or assayer, or by a national government mint. These bars and rounds must also meet the minimum standards for fineness.

Besides gold, investors can also opt for other precious metals to put into their IRA accounts, including silver, palladium and platinum. The allowed metals in these categories include:

Silver

  • American Eagle coins
  • Mexican Libertad coins
  • Australian Kangaroo Nugget coins
  • Canadian Maple Leaf coins
  • Austrian Philharmonic coins
  • Bars and rounds manufactured by a NYMEX/COMEX approved refiner or assayer, or by a national government mint. These bars and rounds must also meet the minimum standards for fineness.

Platinum

  • American Eagle coins
  • Australian Kangaroo Nugget coins
  • Canadian Maple Leaf coins
  • Isle of Man Noble coins
  • Austrian Philharmonic coins
  • Bars and rounds manufactured by a NYMEX/COMEX approved refiner or assayer, or by a national government mint. These bars and rounds must also meet the minimum standards for fineness.

Palladium

  • Bars and rounds manufactured by a NYMEX/COMEX approved refiner or assayer, or by a national government mint. These bars and rounds must also meet the minimum standards for fineness.

The minimum fineness standards for precious metals to use in IRAs,as stated in the IRS rules, is .995 for gold, .999 for silver, .9995 for platinum, and .9995 for palladium.

It is a matter of extreme importance that investors follow the rules for types of metals that are allowed and banned to be placed into their gold backed IRA accounts. If it is discovered that investors have violated these rules, no matter deliberately or unintentionally,they will lose of the tax advantaged status of their IRA account.

Conclusion

Gold and other precious metals are the first thing to come to investors’ mind whenever they think of the best type of financial assets to put into their IRA. This is due to the numerous advantages that these vehicles have over other tradition options such as bonds, stocks and mutual funds. The most prominent advantage is that metals can sustain the ups and downs and the volatility of the market during times of economic distress. For more information on where to buy Gold and precious metals, check out Top 5 Gold IRA Companies.

 

Diversify Portfolio with Gold Backed IRA Account

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