Being comfortable in retirement isn’t something you can expect to happen without planning. If you try to wing it, as many people have, you’ll very likely end up failing. Planning for retirement requires first and foremost a plan, but perhaps more importantly the discipline to stick to that plan.
It also requires making the right investment decisions, something which trips up many investors. Sticking to your investment plan is certainly admirable, but there are times when rethinking your plan, your goals, and your investments can be beneficial.
One of those times is when the economy finds itself on the verge of crisis, as many feel is happening today. This could very well be one of those times when conventional wisdom fails to anticipate the needs of investors and in which unconventional thinking and alternative investment options end up being the name of the game.
One of those alternative investment options is a gold IRA, which has become increasingly popular for those saving for retirement. With a gold IRA retirement plan, you can help protect your investments against potential pitfalls and ensure that your retirement savings are there when you need them most.
Importance of Saving for Retirement
Traditionally, retirement planning has used the metaphor of a three-legged stool. The three legs of that stool were Social Security, pensions, and savings and investment. But today one of those stools has largely gone the way of the dodo, and a second could disappear within our lifetimes, leaving you dependent on your own savings and investment for the security of your retirement.
Pensions Have Disappeared
The old model of work and retirement assumed that you would work for your employers for the entirety of your career, then retire with a guaranteed pension. That model may have worked in our parents’ and grandparents’ era, but it doesn’t work today.
Many workers found out that the guaranteed pensions they expected weren’t guaranteed at all. Numerous pension plans have gone bankrupt over the years, unable to pay out promised benefits due to overly optimistic growth expectations and insufficient funding.
Just about the only place pensions are left is in the government sector, and even those are becoming less generous than they used to be. It may only be a matter of time before pensions become but a distant memory.
Social Security Is Failing
Social Security was never intended to be a pillar of retirement income security. It was always intended only to provide last ditch support to keep people from complete destitution. But successive generations of Americans have come to grow more and more dependent on it.
From the outset Social Security was never going to be fiscally sustainable. Even years of tax hikes and benefit cuts failed to put the program on a sound long-term financial footing. And now Social Security finds itself barely a decade away from depleting its trust fund and being unable to pay out the full amount of expected benefits.
If you’re expecting to receive your full Social Security benefits in retirement, you may end up sorely disappointed. Congress has taken no action to shore up Social Security, and in just over a decade the system may find itself able to pay less than 80% of expected benefits.
Personal Savings Are Key
That means that, if you want to retire in comfort, you’re going to have to do it on your own. Your own personal savings and investments are going to be the key between being able to sustain your current lifestyle in retirement and having to pick and choose what you can afford because you don’t have enough money to sustain your standard of living.
For most people today, saving for retirement means saving through a workplace-sponsored retirement plan, such as a 401(k) or IRA. These types of tax-advantaged accounts were initially developed as just another tool for people to help save money for retirement, but have quickly become the cornerstone of most people’s retirement planning.
Basics of Tax-Advantaged Retirement Accounts
When most people think of tax-advantaged retirement accounts, they think of either a 401(k) or an IRA. While the IRA preceded the 401(k), the 401(k) has become the dominant workplace retirement plan.
Most 401(k) plans work by allowing employees to choose a portion of their income to be directed to their 401(k) account before taxes. These funds can then be invested and accrue gains tax-free. Taxes are only taken out when the account owner decides to take a distribution from the account. IRA plans often work similarly, with pre-tax dollars being invested and only being taxed at the time of distribution.
Some investors choose to invest post-tax dollars in Roth accounts such as a Roth IRA, which allows investors to accrue gains tax-free and then pay no taxes at distribution. Roth IRAs are the better known type of Roth account, versus Roth 401(k)s.
Despite the widespread use and appeal of tax-advantaged retirement accounts, many investors find themselves limited in their investment choices and wishing they had more options. Many are at the mercy of their plan administrators, who may only offer a handful of investment choices, many of those merely various types of investment funds.
These investors may decide to start looking elsewhere if they want to find other investment options. And one increasingly popular option that’s being chosen is a gold IRA.
What Is a Gold IRA?
A gold IRA is, just like it sounds, an IRA account that invests in gold. Rather than sticking to financial assets like stocks, bonds, and mutual funds, a gold IRA allows you to invest in physical gold coins or bars. These gold coins or bars are yours, stored in a depository, and when you take a distribution, you can do so either in cash or in physical gold.
Advantages of a Gold IRA
The advantages of a gold IRA are numerous, not just in terms of your ability to protect and defend your existing wealth, but also in terms of your ability to grow your wealth into the future. A gold IRA provides you with a simple and effective way to turn your existing tax-advantaged investments into an investment in gold.
One of the major advantages of a gold IRA is its ability to diversify your investment portfolio. A portfolio that’s solely investing in stocks and bonds, or funds that invest in stocks and bonds, is a portfolio that’s highly vulnerable in the event of a financial crisis. As we saw during the 2008 financial crisis, major systemic crises affect not only stocks, but also bonds, money market funds, and other types of financial assets.
Gold, on the other hand, isn’t affected by financial crises in the same way as stocks and bonds. In fact, when financial assets lose value, gold often gains value. That can make it a good choice if you’re looking to diversify your portfolio and hedge against what might be coming in the future.
Gold also has a history of performing well during times of high inflation. This was especially true during the 1970s, when gold’s average annual growth rate was over 30%. During that same period of time, the Dow Jones Industrial Average rose less than 4%, and inflation rose as high as 11%. Investors who were able to invest in gold during that decade could have had some pretty amazing returns.
With inflation high and rising today, gold can still offer protection against inflation. And if its performance this decade is similar to its 1970s performance, gold investors will be very happy with their decision to own the yellow metal.
There’s no telling when inflation will stop rising or how high it might get. Even policymakers are warning that things may get worse before they get better. Isn’t it time to start thinking about protecting your assets against inflation with a gold IRA?
As inflation rises, the value of each dollar you hold is devalued. Over the course of the 20th century, the dollar lost value just about every year. Since 1913, the dollar’s purchasing power has fallen over 96%. At current inflation rates, your purchasing power would be cut in half in less than a decade. And if you end up living 25 years in retirement, your purchasing power would decrease 84% by then.
Those are pretty sobering statistics, and underscore the need to protect the value of your retirement savings against devaluation of the dollar. With the dollar set to lose more and more value each year, gold’s ability to gain value during times of inflation can help protect you against this devaluation and ensure that you’re better able to maintain the quality of life you hope to enjoy in retirement.
Gold doesn’t just gain value during tough times, either. Since 2001, gold has grown at an annualized rate of 9.7%, versus 5.7% for the Dow Jones and 5.8% for the S&P 500. Far from being just a hedge during crises, gold can help you grow your wealth whether markets are booming or not.
This is perhaps the most underrated and underappreciated quality of gold. But it could be a vitally important one in the years to come, as stock markets enter a period of turbulence and uncertainty and the economy looks to be slowing down.
Safeguard Against Stock Market Crash
Many investors watched in horror during the 2008 financial crisis as stock markets lost more than half of their value. And many investors saw their retirement savings decimated. Were you one of them?
Many of those same investors watched as gold began to take off in the aftermath of the crisis, nearly tripling in price as it hit an all-time high in 2011. And they vowed that the next time the economy was on the verge of a stock market crash, they would be invested in gold so they could ride out the crash with their assets protected by gold.
Many investors have already fulfilled those vows. But many more are still on the fence, still hoping that stock markets have a little bit of life in them. Are you one of those still waiting to see just how far stock markets will drop before deciding to protect your assets? Or have you already decided that you need to start protecting your wealth?
Gold IRA Investment
Thousands of investors have recently made the decision to buy gold. And with a gold IRA, investing in gold can be just as easy as investing in any other tax-advantaged retirement account.
Gold Coins or Bars
Unlike other forms of investing in gold, such as buying shares in gold exchange-traded funds, investing in a gold IRA means that you actually own physical gold coins or bars that are yours. And when you choose to take a distribution from your gold IRA, you can take it either in cash or in those physical gold coins or bars that you purchased.
Working With a Custodian and Depository
As with any other IRA, your gold IRA assets must be managed by an IRA custodian. And your gold IRA assets are stored at a gold depository. Goldco has established relationships with gold IRA custodians and gold depositories to ensure that your gold IRA assets remain safe and secure.
Starting a Gold IRA
Starting a gold IRA can be done relatively quickly, in just four easy steps.
1. Select Your Gold IRA Plan
First you’re going to want to select what type of gold IRA you want. Many gold IRA customers decide to roll over a 401(k), TSP, IRA, or similar retirement account that has been invested with pre-tax dollars. But others decide to open a gold Roth IRA and transfer assets from a Roth IRA or Roth 401(k) account, or perform a Roth conversion. Whether you’re doing a 401(k) to gold IRA rollover or setting up some other sort of gold IRA, Goldco’s precious metals experts can help answer any questions you have about the various types of gold IRA accounts.
2. Choose Your Gold IRA Custodian
Once you’ve established your gold IRA plan, you’ll want to choose a custodian. Goldco partners with established and trustworthy custodians who have experience managing precious metals.
3. Fund Your Gold IRA
The decision on how to fund your gold IRA will largely depend on the type of plan you choose. If you decide on a 401(k) to gold IRA rollover, funds will come from your 401(k) account. Alternatively, you could choose to fund a gold IRA from other accounts, such as a 403(b), 457, TSP, or IRA account.
Rollovers and transfers from these accounts are normally tax-free. While Goldco can help you with the funding process, you’ll also want to consult with your financial advisor and tax advisor to make sure that you don’t inadvertently open yourself up to tax liabilities.
4. Buy Gold
Once your gold IRA has been funded, it’s time for you to decide what type of gold you want to buy. The choices may seem limitless, with numerous types of gold coins and bars out there.
Goldco offers a wide selection of gold products from mints around the world. Our established relationships with numerous mints allow us to offer an exciting array of products that are guaranteed to be authentic.
Is a Gold IRA the Right Decision for You?
At the end of the day, the decision on whether or not you want to start a gold IRA comes down to you and your financial needs. Do you want to make sure that you have enough money for retirement? Do you want to protect your retirement savings against rising inflation or a possible stock market crash? Are you looking to diversify your portfolio and reduce your exposure to Wall Street? If so, then maybe you should look closer at a gold IRA.
We’re entering a period of time that for most people alive today is unprecedented. High inflation and a weakening economy could result in the next decade being one of stagflation, a phenomenon that we haven’t seen since the 1970s. It could upend the financial decision making and retirement planning of millions of households, and might require a completely new approach to both building and maintaining your wealth.
With no experience with high inflation, most people today are understandably unprepared to deal with it. But hoping that inflation is a fleeting problem that will go away soon isn’t a solution to the problem. To really protect your wealth and ensure that your hard-earned savings will be there when you need them most will require being proactive. And that’s where the decision to start a gold IRA can start to pay off.
If you want to safeguard your savings, a gold IRA could play a critical role in doing that. Every day that you put off the decision to protect your wealth is one more day in which your assets are exposed to loss.
Don’t let your retirement savings remain at risk any longer. Call the experts at Goldco today and find out how you can protect and defend your portfolio with gold.