Is a Gold IRA a Good Investment?


There are many reasons people choose to invest in gold. Sometimes it’s because they fear the risk of asset loss during a recession. Sometimes it’s because they’re afraid that holding cash is a losing bet when inflation is rising. And sometimes it’s just because they have an inkling that owning gold is the right decision at the current time.

But one question many people have is how to invest in gold. With numerous options out there, not to mention numerous gold products, finding the right gold investment can sometimes seem overwhelming.

More and more people today are turning to a gold IRA to help protect their assets, and particularly their retirement savings. And the one question many of them have is, is a gold IRA a good investment?

What Is a Gold IRA?

A gold IRA is just like any other IRA except that it holds gold coins or bars rather than more conventional financial assets such as stocks, bonds, or shares in funds. A gold IRA allows you to enjoy the same tax advantages as any other tax-advantaged IRA retirement account while also enjoying the benefits of owning gold.

Gold IRA Benefits

There are numerous benefits to owning gold in a gold IRA. Here are four of the biggest benefits.

1. Diversify Your Portfolio

If nothing else, gold can help you diversify your portfolio and adjust your risk profile. Gold is often seen as a countercyclical asset, one that performs well when other financial assets are performing poorly.

Gold also is seen as less volatile than some other investments, offering stability to your portfolio. Even the most hardcore anti-gold investors may hold a small portion of their investments in gold in order to provide their portfolios with additional diversification.

While there undoubtedly are people who have done well for themselves by investing in only a single stock or a handful of stocks and bonds, the risks of not diversifying can be great, especially if you’re a passive investor. This is where gold can help play a role in portfolio diversification, as it can continue maintaining value even when Wall Street isn’t doing well.

2. Hedge Against Inflation

Another traditional use of gold is as a hedge against inflation. Gold tends to maintain its value and purchasing power over time. While the US dollar doesn’t buy as much as it used to, an ounce of gold tends to maintain the same amount of purchasing power over the long term.

Gold’s performance during the stagflation of the 1970s was phenomenal, with nominal annualized gains of over 30% over the course of the decade, and real inflation-adjusted returns of over 20%. Many people are banking that if inflation today becomes entrenched for years, then gold might repeat some of that performance.

3. Grow Assets Tax-Free

Like any other IRA, a gold IRA allows you to grow your assets tax-free. If your gold IRA is a Traditional gold IRA then you would pay taxes when you take a distribution. If your gold IRA is a Roth gold IRA then you would pay no taxes when you take a distribution.

Since a gold IRA can also be funded with a transfer or rollover from a 401(k), 403(b), TSP, IRA , or similar retirement account, this allows you to maintain the tax-advantaged status of your retirement savings while moving them into a different class of assets without having to take a distribution and subject yourself to taxes or penalties.

4. Wealth Security

Gold is often viewed as the ultimate money. For thousands of years, when paper currencies and other fiat currencies have failed, gold has always reestablished itself as the money of choice. It has helped protect people during hyperinflationary crises and through economic turmoil.

But it isn’t just during times of crisis that gold shines. Gold can also help maintain and grow your wealth when times are good, with 9% annualized growth since 2001.

Gold IRA vs. Other Gold Investments

When it comes to investing in gold, there are numerous options out there. And trying to choose between the different ways to invest in gold can seem confusing. Here are a few of the alternative methods some people use to invest in gold or gain exposure to gold, and how they compare with a gold IRA.

Gold IRA vs. Gold ETFs

Gold exchange-traded funds (ETFs) have become a popular method to invest in gold. Rather than investing in gold itself, investors buy shares in a fund that owns gold. The prices of those shares are supposed to rise and fall with the gold price.

One advantage of gold ETFs is that they are often available from the same brokerages with which many investors have their existing retirement accounts, making it easy to transfer funds from other assets into a gold ETF.

Some of the disadvantages of investing in a gold ETF include the fact that you’re not actually investing in gold, but rather in shares of a fund. And you can’t convert those shares into gold.

You also have to trust that the fund actually owns and controls the gold that it says and does, and that the custodians and subcustodians of that gold haven’t loaned it out or otherwise encumbered ownership of it.

If you read up on paper gold vs. physical gold, you quickly realize that there’s a big difference between owning shares in a gold fund and owning actual physical gold coins or bars. With a gold IRA, you choose the gold coins or bars you want, you own them, and you can take physical delivery when you choose to take a distribution.

Gold IRA vs. Gold Mining Stocks

Some people like to own stocks in gold mining companies. They theorize that when the gold price is high, gold mining companies will do well and their stock prices will rise.

While that can be true, mining companies are just like any other company. They’re subject to mismanagement, political risk, environmental risk, labor disputes, etc. So even if the gold price is high, the threat of a strike, or of government expropriation, or just plain bad management can drag the stock price down even if gold is going gangbusters.

With a gold IRA, by contrast, the only people you have to trust are the custodian who manages your gold and the bullion depository where your gold is stored. Goldco partners with custodians and depositories who have significant experience in the precious metals industry and who can be trusted to keep your gold IRA assets safe and secure.

Gold IRA vs. Physical Gold

Finally, there are some people who think that investing in gold isn’t any good unless you can physically access and touch that gold anytime you want. You can’t do that with a gold IRA, as your gold is stored at a depository. But you can take delivery of your gold IRA assets from the depository when you decide to take a distribution.

For those who want to hold their gold in their own hands, Goldco offers a direct purchase option. If you don’t want to start a gold IRA, you can purchase gold coins that Goldco will ship wherever you choose. You can store your gold coins at home in a safe, at a bank safe deposit box, or even choose a bullion depository if you wish.

Not everyone wants to have a gold IRA, and that’s perfectly fine. That’s why Goldco offers numerous options so that we can serve our customers no matter how they want to buy or store their gold.

How to Start a Gold IRA

Starting a gold IRA isn’t that much different from starting any other IRA. Working with a partner like Goldco, you’ll choose a custodian to manage your gold IRA assets, as well as a depository to store your precious metals. One of the most important decisions you’ll want to make is how to fund your gold IRA.

How to Fund a Gold IRA

One of the most popular methods of funding a gold IRA is through a 401(k) to gold IRA rollover. Sometimes you may have a 401(k) with limited investment options, or you have an orphaned 401(k) from a previous employer. In these instances you can roll over those assets into a gold IRA tax-free.

There are additional rollover and transfer options, including funding your gold IRA from assets you hold in a 403(b), 457, TSP, IRA, SIMPLE IRA, SEP IRA, or similar retirement account.

And of course you could always make annual contributions to your gold IRA too, although you’re subject to the same rules as any other IRA, including an annual $6,000 contribution limit across all your IRA accounts.

Is a Gold IRA Right for You?

Ultimately you’re the only one who can answer the question as to whether a gold IRA is a good investment. You obviously want to consult with your financial advisor or tax advisor to make sure that you follow all the necessary IRA rules and regulations so that you don’t inadvertently expose yourself to taxes and penalties. But the decision on whether a gold IRA is right for you is something you’ll have to make for yourself.

Among the things you’ll want to ask yourself is whether or not you want to have access to physical gold coins at some point. How long do you intend to hold onto your gold coins and bars? And how much control will you want to have over your gold assets?

Answering these questions can give you a better sense of whether a gold IRA is a good investment for you. And if you think a gold IRA might be the right choice for you, or if you want to learn more about a gold IRA, contact the precious metals experts at Goldco today. With over $1 billion in precious metals placements and thousands of satisfied customers, Goldco is ready to help you benefit from owning gold.

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About the Author: Paul-Martin Foss