It is in times like these that investors increasingly turn to gold and silver. Both gold and silver have a long history of service as safe haven assets during times of political and economic turmoil. When uncertainty takes hold and the future no longer looks as safe and secure as once thought, gold and silver can help provide safety and security to those looking to protect their wealth.
Between growing economic uncertainty, rising inflation, and military conflict, investors today face greater difficulties than perhaps at any other time in the past 50 years. Whereas the future once looked bright, with a strong economy and stock market, the past two years have been ones of gloom and despair. With inflation now taking a bigger bite out of our assets, and war or the prospect of war consuming more and more of our attention, it shouldn’t be any surprise that more and more investors are turning to gold and silver.
If you’ve been thinking about investing in gold and silver but haven’t yet pulled the trigger, now may be the right time. And if you’ve been wondering if a gold or silver IRA might be the right choice for you, here’s everything you need to know about gold and silver IRAs.
Why Invest in Gold and Silver
The first question many investors ask themselves is, “Why should I invest in gold and silver?” If you’ve never read anything outside mainstream financial media, that’s understandable. Most mainstream financial publications have every incentive to push stocks and bonds, and they like to forget that gold and silver even exist. But if you ignore gold and silver, you’ll never get to know their many benefits.
One of the primary benefits of investing in gold and silver is portfolio diversification. Many investors believe that investing in a wide variety of stocks and bonds is enough to diversify their portfolios. But in the event of a systemic financial crisis, both stocks and bonds could drop in value.
Real diversification means investing across numerous different asset classes, whether it’s precious metals, real estate, agricultural commodities, etc. Gold and silver have traditionally been one way to provide investment portfolios with this much needed diversification.
Protection Against Turmoil
Everyone fears a stock market crash, but not everyone knows how to protect against it. Experienced investors know that gold and silver have often provided protection against stock market crashes and geopolitical turmoil. That’s one reason gold prices tend to rise during periods of war and international conflict.
When it comes to market crashes, gold and silver often rise in price as stock markets fall. In the aftermath of the 2008 financial crisis, for instance, gold nearly tripled in price while silver more than quintupled. All that happened while stock markets were still struggling to regain their pre-2008 levels.
If you’re looking for safety and security during times of uncertainty and crisis, gold and silver could provide you with the stability you’re looking for.
Gold and silver have also been traditional defenses and hedges against inflation. When inflation rises, gold and silver tend to rise in value too. During the 1970s stagflation, for instance, gold and silver both saw average annualized growth rates of over 30% over the course of the decade.
With the 2020s poised to become yet another stagflationary decade, and gold and silver already starting to rise in response to rising inflation, there’s every reason to believe that gold and silver price will continue rising if inflation remains elevated or worsens. And while the dollar and other assets may fall in value or lose purchasing power, gold and silver could continue gaining value.
Gold and silver aren’t just protection for bad times. They can also provide much needed asset growth during good times as well.
Over the long term, gold can gain value just as much as stocks do. Since August 15, 1971, gold has grown at a 7.9% annualized rate, versus 7.8% for the S&P 500 and 7.4% for the Dow Jones Industrial Average. And since 2001 gold’s performance has been even more remarkable, growing at an annualized rate of 9.9%, versus 5.7% for the S&P 500 and 5.6% for the Dow Jones.
Those numbers should convince you that gold isn’t just a hedge or a diversifier, it can also be a good means of growing your assets.
How Do Gold and Silver IRAs Work?
Many investors who choose to invest in gold and silver today do so through gold and silver IRAs. These retirement accounts allow them to invest in gold and silver with relative ease and convenience. But how do gold and silver IRAs work?
What Is a Gold IRA?
First let’s talk about what a gold IRA is. A gold IRA is a tax-advantaged retirement account that allows you to invest in gold or other precious metals while still enjoying all the same tax advantages as a conventional IRA retirement account. Your gold IRA could be a Traditional gold IRA, in which you invest using pre-tax dollars, or it could be a Roth gold IRA, in which you invest using post-tax dollars.
What Is a Silver IRA?
A silver IRA is just like a gold IRA, only that it invests in silver instead of gold. Just like a gold IRA, your silver IRA can be a Traditional silver IRA, in which you invest using pre-tax dollars, or it could be a Roth silver IRA, in which you invest using post-tax dollars.
Both gold and silver IRAs are examples of self-directed IRAs, which are a type of IRA that allows you to invest in alternative assets that you might not have access to through most Traditional or Roth IRAs. Self-directed IRAs allow you, the account holder, to manage your account directly and determine what types of assets you invest in.
You can invest in both gold and silver in a precious metals IRA, or you could set up a self-directed IRA to invest in numerous other types of alternative assets such as real estate, agricultural commodities, cryptocurrencies, etc.
Gold and Silver IRA Rules
Gold and silver IRAs are subject to all the same rules and regulations as conventional IRAs. Whether your gold and silver IRAs are Traditional or Roth, all the same rules and restrictions apply. And it’s very important that you familiarize yourself with those rules and discuss them with your financial advisor or tax advisor before you start investing so that you won’t inadvertently subject yourself to costly taxes and fees.
Types of Investments
Like all IRA accounts, gold and silver IRAs cannot invest in collectibles. This means that any coin considered a collectible is ineligible for investment through a gold or silver IRA. Additionally, only certain gold and silver coins are eligible for investment through a gold or silver IRA.
These include certain coins minted by the US Mint and specifically authorized by law for IRA investment, and any coins that meet minimum fineness requirements. This means that if you had your heart set on investing in South African Krugerrands or $20 St. Gaudens gold coins, you won’t be able to invest in them through a gold IRA. Using IRA assets to purchase those coins would be treated as a distribution of assets and would subject you to potential taxes and penalties.
Thankfully there are numerous coins available to you to invest in, such as American Gold and Silver Eagles, Canadian Maple Leafs, and a whole host of other gold and silver coins. Most mints today are aware of the requirements of US tax law when it comes to investing in gold and silver coins through a gold or silver IRA, and they produce coins designed to allow US investors to purchase them. Goldco offers a wide variety of those coins available for sale.
Gold and silver IRAs are also subject to the same contribution limits as other IRA accounts. For 2022, that limit is $6,000 if you’re under age 50, and $7,000 if you’re over age 50. The income limits for IRA contributions are also the same for gold and silver IRAs as they are for other Traditional and Roth IRAs. But many people choose to fund their gold and silver IRAs through rollovers and transfers from existing tax-advantaged retirement accounts.
Rollovers and Transfers
Rolling over funds from a 401(k) to a gold or silver IRA, or transferring funds from an existing IRA to a gold or silver IRA are popular options for people looking to use their existing tax-advantaged retirement funds.
In some cases, these rollovers and transfers are the result of orphaned funds held in a previous employer’s retirement plan. In other cases, employees want to access a wider array of investment options. And in still other cases, investors want to protect the gains they have made in a 401(k) or IRA account and move to safer investments without incurring a tax liability.
Rollovers or transfers from 401(k), 403(b), TSP, IRA, and similar accounts can be made to a gold or silver IRA tax-free. Or if you prefer, you could also perform a Roth conversion by rolling over or transferring funds from a 401(k) or similar account into a Roth gold or silver IRA.
Gold and silver IRAs have all the same tax advantages as any other IRA account. If your gold or silver IRA is a Traditional IRA, that means you can invest with pre-tax dollars and only pay taxes when you take a distribution. If your gold or silver IRA is a Roth IRA, you invest with post-tax dollars and pay no taxes when you take a distribution.
Required Minimum Distributions
The regulations surrounding distributions and required minimum distributions (RMDs) are the same for gold and silver IRAs as they are for other IRA accounts. If your gold or silver IRA is a Traditional IRA, you’ll be required to take RMDs once you reach age 72. And if you take distributions before age 59 ½, you’ll pay taxes and penalties.
Precious Metals IRA Custodian
As with any other IRA account, the assets in your gold or silver IRA will have to be managed by a custodian. Goldco partners with trusted gold and silver IRA custodians who have experience in the precious metals industry.
Your gold and silver will also need to be stored at a precious metals depository. Goldco partners with depositories who offer decades of experience in keeping our customers’ gold and silver safe and secure.
Advantages of a Gold or Silver IRA
Gold and silver IRAs have numerous advantages over other types of IRA investments.
Diversify Your Investments
A gold or silver IRA allows you to diversify your existing tax-advantaged assets and achieve your desired level of portfolio diversification without requiring you to incur tax liabilities by divesting yourself of tax-advantaged assets.
Most people become more risk averse as they near retirement. They want to protect their gains and are more concerned with maintaining their existing wealth than in making big investment gains.
Because gold is considered a less risky asset, it can play an important role to those who are trying to reduce the risk profile of their investments.
Protect Tax-Advantaged Assets
Many people who have assets invested in 401(k) or IRA accounts may not have a risk-free place where they can park their money if they fear a stock market correction. They may think that their only options are to ride out a stock market crash or to cash out their retirement savings and take a huge tax hit.
With a gold or silver IRA, you can move your retirement assets into an investment in gold and silver, helping you take advantage of gold and silver’s ability to gain value even during periods when stock markets are losing value and keep you from incurring a huge tax liability.
How Do Gold and Silver IRAs Work?
Starting a gold or silver IRA doesn’t have to be difficult. In fact, it can be done in four easy steps.
1. Make the Decision to Open a Gold or Silver IRA
The first step is to make the decision to open a gold or silver IRA and to work with a trusted partner. Goldco has over a decade of experience helping thousands of customers take advantage of the benefits of gold and silver IRAs.
2. Choose a Custodian
Next you’ll want to choose a custodian to help manage and administer your gold or silver IRA. Goldco’s trusted partners have helped numerous customers administer their gold and silver IRAs.
3. Fund Your Gold or Silver IRA
Once you have your gold or silver IRA set up and have chosen a custodian, you’ll want to figure out how you will fund your IRA. If you’re deciding to fund a gold or silver IRA through a rollover or transfer from an existing retirement account, you’ll want to consult with your tax advisor or financial advisor to make sure that you’re not going to accidentally incur tax liabilities.
4. Purchase Your Gold and Silver
Once your gold or silver IRA is funded, it’s time to make the decision on what types of gold and silver you’ll buy. Remember that only certain types of gold and silver coins and bars are eligible for investment through a gold or silver IRA.
Goldco offers numerous IRA-eligible gold and silver coins and bars to our customers, and our experts will work with you to ensure that the gold and silver you buy can be purchased and held in your IRA.
Is a Gold or Silver IRA Right for You?
When it all comes down to it, the decision on whether or not to invest in a gold or silver IRA is up to you. It’s dependent on your individual investing needs, your retirement goals, and your appetite for risk. But if you’ve been working hard for years or decades to save money for retirement, don’t you owe it to yourself to protect those savings?
If you’re worried about inflation wiping out your purchasing power, about the effect of war on the economy and international markets, or about the likelihood of a stock market crash, this is the time to start getting serious about protecting your wealth. Especially if you’re close to retirement, you can’t afford to experience another 2008-style crisis and lose half of your savings. A loss like that could take years to recover from.
Many investors vowed after 2008 that they wouldn’t let another crisis like that affect their savings. They vowed that the next time a crisis threatened, they would protect their savings with gold and silver. Will you be one of them?
Every day that you don’t protect your retirement savings is a day that they’re at risk of loss, possibly even catastrophic loss. Don’t assume that you’ll have plenty of time to protect your assets, because at some point you may not. The sooner you start taking steps to protect your wealth, the safer you could be in the future. Call the experts at Goldco today and put yourself on the road to safeguarding your retirement savings.