What Are the Advantages of a Gold or Silver IRA?

What Are the Advantages of a Gold or Silver IRA?

All investors want their retirement portfolios to perform well and make money for them, but in the back of their minds they understand that their portfolios can be subject to huge losses. That’s why many of the most successful investors over time are those who protect their portfolios from major losses, not necessarily those who make the biggest gains.

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One of the time-honored ways to protect investment and retirement portfolios is by investing in gold and silver. Investors have sought the safety and security of gold and silver for centuries, and today is no different. When stock markets crash, or when there’s even a hint of a crash, investors race to get their hands on as much gold and silver as they can.

Gold and silver are tangible assets that anyone can own and hold, and they offer stability against inflation, financial turmoil, and economic downturns. Thanks to loopholes in the tax code, investors can even invest in gold and silver through a gold and silver IRA, allowing them to gain all the same tax advantages as a traditional IRA.

With a gold or silver backed IRA, investors can use pre-tax dollars to invest in gold and defer taxation until they decide to take a distribution. They can even roll over existing retirement assets into a gold or silver IRA, allowing them to lock in gains they may have made in stocks and transfer that wealth into precious metals.

Given the long-term stability of gold and silver, they make a perfect asset for investors looking to protect their wealth, and even for those looking to pass wealth on to their heirs. If you’re looking to protect your retirement savings, ensure that you have enough money to live comfortably in retirement, and even pass money on to your children and grandchildren, keep reading to find out more about advantages of a gold and silver backed IRA.

What Are the Advantages of a Gold or Silver IRA?

Gold and silver IRAs have numerous advantages for investors, both those nearing retirement and those earlier in their careers. First and foremost, among those is providing much-needed stability to investors’ portfolios in both the short and long terms. Secondly, investing in gold and silver helps investors with risk adjustment. The further they get in their retirement planning, the less risky they want their portfolio to be. That means decreasing the percentage of stocks they hold and increasing the amount of gold and silver they own.

This doesn’t mean that you have to pour all of your assets into gold and silver, but even small percentages can be incredibly beneficial. Investors who put 10, 20, or 30 percent of their portfolios into gold during the 2008 financial crisis saw their investments strongly outperform those who kept their assets in stocks. And those portfolios that held gold continued to grow stronger after the crisis hit its nadir too, in many cases for years afterward.

Diversification

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A strong investment portfolio is one that is properly diversified. Diversification doesn’t just mean having a mix of stocks and bonds, which is what most financial advisers are most familiar with. It means diversifying your assets so that you’re not concentrating your risk in any one area, whether it’s a single country, currency, or industry.

Traditional retirement accounts that offer a mix of stocks, bonds, money market funds, etc., are all at the mercy of Wall Street. If financial markets seize up, if bond markets become illiquid, if stock markets crash, all of those assets will perform poorly.

One advantage of a gold or silver backed IRA is that it helps investors diversify and shift risk away from financial assets, leaving a portion of their portfolio protected during those times that Wall Street experiences weakness. In fact, the weaker Wall Street performs, the better gold and silver perform, making them ideal assets to protect a portfolio when recession is on the horizon.

Insurance

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Gold and silver are hedges, insurance against some unseen but expected calamity. The boom and bust of the business cycle is all but a certainty, with stock market crashes and recessions occurring with unfortunate regularity.

Gold and silver have always acted as a hedge and will continue to do so into the future. Unlike paper assets like stocks and bonds that can become worthless as companies fail, gold and silver will always be worth something. An ounce of gold will always be an ounce of gold, will always be in demand around the world, and will continue to maintain its value no matter how poorly the economy performs.

Control

Investing in a gold or silver IRA also provides investors with a greater element of control over their investments. For many investors who may save for retirement through a 401(k) plan, the options available to them are limited. By opening a gold or silver IRA, they gain an extra element of control over their investment portfolio, as they are the ones who determine what types of gold or silver they invest in.

A great advantage of having a gold or silver IRA is that assets can be transferred easily and tax-free among retirement accounts. So an investor who wants to move a portion of a 401(k) account into a gold and silver IRA can do so relatively easily. And if that investors decides in the future to move some of those precious metals assets back into stocks or bonds, that type of rollover can be done too.

There’s no quantifying the benefits that control over investments offers to the average investor. It helps to diversify an investment portfolio, relieve stress, and ensure that the decisions you make will directly benefit your retirement.

Growth Potential

There’s a dirty little secret that mainstream financial advisers don’t want you to know about. Gold is the second-best performing asset of the past 20 years. In fact, it’s grown about twice as fast as stock markets have. But advisers still recommend stocks for asset growth for two reasons.

The first is that they’re still stuck feeling nostalgic about the 1982-2000 stock market boom. That was a period of unprecedented growth, with stock markets growing nearly 15% per year on average. But we haven’t seen growth like that since then, and we may never see growth like that again.

The second is that most financial firms make their money off fees associated with stock trades, asset management, etc. They don’t make money selling people gold because people hold gold for the long term. Financial advisers and stockbrokers want to be able to charge $3.95 per trade, plus a small management fee every year for each type of asset you own. But if you own gold, they can’t charge you a management fee because you control that gold, not them.

While that’s bad for financial advisers, it’s good for you because your gains aren’t being nickeled and dimed to death through management fees. Traditional advisory fees are death by a thousand cuts, but investing in gold and silver ends that and keeps more money in your pocket.

Tax Advantages

Just like with a traditional IRA, investing in gold or silver offers the same tax advantages. You can invest in gold and silver with pre-tax dollars, roll over existing retirement assets tax-free, and defer taxation until you decide to take a distribution. And just like with traditional IRA contributions, annual contributions to a gold or silver IRA can even be tax deductible.

That also means that all the same IRA rules apply. Distributions before age 59 ½ incur an additional 10% penalty, required minimum distributions must be taken after age 70 ½, and annual contributions are limited to $6,000 (or $7,000 if you’re over age 50). But when you take a distribution, you can choose to take it either in cash or in gold and silver.

By keeping their gold and silver in an IRA, many investors feel like they get a much better rate of return than when they hold precious metals through a traditional brokerage account such as those offered by some mints. Don’t underestimate the ability to use pre-tax dollars and defer taxation on your gains for years or even decades.

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It should be clear from the advantages of gold and silver IRAs that they are the best way to diversify and protect your investment portfolio. With both tremendous potential for growth as well as the ability to safeguard your existing wealth, gold and silver are unmatched as investment assets. If you’re worried about how best to protect your hard-earned retirement savings in the event of an economic downturn, contact the experts at Goldco to learn more about how a gold or silver IRA can keep your assets safe in any economic climate.