How Gold and Silver IRAs Work

How Gold and Silver IRAs Work

Gold and silver have been popular investments for centuries, safeguarding investor wealth through thick and thin. And one of the most popular ways to invest in gold and silver today is through gold and silver IRAs. If you’re not familiar with gold and silver IRAs, it’s probably because your financial adviser or retail brokerage doesn’t offer them. But a gold or silver IRA can be a powerful investment tool to build up and maintain your retirement savings.

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Just like a traditional IRA, gold and silver IRAs allow you to invest your pre-tax earnings and keep them exempt from taxation until you decide to take a distribution. The only difference is that instead of investing in stocks, bonds, or other financial assets, your gold or silver IRA invests in physical gold or silver coins or bullion.

Many investors found out the hard way during the 2008 financial crisis that stock market wealth was largely illusory. They watched as their 401(k) and IRA accounts lost over 50% or more of their value during the crisis. And they also watched enviously as gold gained 25% during that same time frame and continued to gain value over the next few years.

Being wise with your investments is the best way to ensure that you’ll enter retirement in sound financial shape. If you’re interested in protecting your hard-earned wealth, keep reading to find out how a gold or silver IRA can help you.

How Does a Gold and Silver IRA Work?

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Gold and silver IRAs don’t differ that much from traditional IRAs. Rather than a financial firm holding your stocks or bonds in trust for you, a gold or silver IRA requires you to choose a custodian to safeguard your gold and silver coins or bars. That custodian takes care of storage, safekeeping, and insurance.

Your responsibility as an investor is largely to the IRS, particularly at distribution time when you have to pay taxes on your gains. But once you elect to take a distribution, you can choose to take it either as cash or in physical metal, allowing to keep holding your gold or silver once it’s no longer owned by your IRA.

Investors trust gold and silver over other assets because they hold their value better than any other asset. Over the long term, gold and silver’s value and purchasing power only increase. An ounce of gold buys just as much as it did a century ago, or maybe even slightly more. Compare that to the dollar, which has lost 96% of its value since 1913, or stocks which rise and fall through booms and busts. Gold and silver just keep plugging away.

How Gold Holds Its Value

Gold’s nature as a tangible asset makes it a particularly attractive investment for many investors. With so much of the financial system today existing largely on paper or in computer systems, the appeal of tangible assets is greater than ever. So many investors think of the financial system today as a house of cards that is bound to come crashing down, so the thought of holding on to tangible assets that maintain their value is incredibly comforting.

Gold’s value is the result of millennia of monetary and industrial use. From jewelry to coins to electronic components, gold has a variety of different uses. It remains in demand across the world as perhaps the single asset universally valued across all cultures.

Gold hasn’t always been the best asset for rapid wealth appreciation, as its growth in value is normally rather sedate. But over the past 20 years gold has actually been the second-best investment asset around, with nearly twice the growth rate of stock markets.

Still, gold’s real strength is in its ability to protect wealth during tough economic times. It’s during times of financial turmoil that gold really shines. The worse inflation gets, the worse stock markets perform, and the slower the economy grows, the better gold performs. That’s why gold is such an important asset for investors to hold as a hedge against recession and inflation.

How Silver Holds Its Value

Silver has long played second fiddle to gold, although its price moves largely mirror those of gold. There’s a lot more industrial demand for silver than for gold, so industrial uses play a larger role in silver’s price movements. With increased industrial demand for silver in items such as solar cells, electric car batteries, and medical equipment, silver’s price is due to rise significantly in the future.

It helps that silver isn’t normally a primary product of mining. It’s often found as a byproduct of gold, nickel, or copper mining. And with mining worldwide becoming more difficult and more expensive, primary production of silver is set to decrease. Even with silver recycling helping to bridge the gap, supply shortages will also help lead to a higher silver price.

Even though silver is currently far less valuable than gold is, it nonetheless plays an important role in investors’ portfolios. With its significant potential for growth, IRA approved silver can form part of a strong one-two punch for investors looking to protect their retirement savings.

Getting Your Gold or Silver IRA

Both gold and silver IRAs are examples of self-directed IRAs. Those are IRAs in which you, the investor, are your own fiduciary. You establish your IRA, determine who your custodian is, and choose what assets your IRA invests in.

Both gold and silver IRAs require a custodian to store your metals and a broker to purchase your metals. You can’t add coins or bars that you already own to your gold or silver IRA, but you can roll over existing retirement assets into a gold or silver IRA. That allows you to move funds from an underperforming 401(k) or IRA account into a new gold or silver IRA.

The process of opening a gold or silver IRA isn’t terribly difficult, and the experts at Goldco will guide you through every step of the process. So if you’ve ever wondered to yourself “How does a silver IRA work?”, you won’t have to wonder much longer.

As with any other IRA, the same rules and restrictions apply. Distributions before age 59 ½ are assessed a 10% penalty, required minimum distributions must be taken after age 70 ½, and annual contribution limits apply. There are no limits, however, on the amount of money you can roll over from existing retirement savings into a gold or silver IRA.

Why Gold and Silver IRAs Are Increasing in Popularity

Because gold and silver often find their strongest performance when paper assets such as stocks and bonds are weakest, they are becoming more and more popular investment assets now that stock markets have plateaued. Both gold and silver IRAs are seeing an influx of investors looking to take advantage of gold and silver’s ability to safeguard wealth.

Building on their popularity that took off in the aftermath of the 2008 financial crisis, both gold and silver are set for tremendous gains in price once stock markets begin to decline. That will help those investors who had the foresight to eschew the volatility inherent in stock markets and seek the stability that only gold and silver can offer.

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If you’ve decided that a gold or silver IRA is right for you then contact the experts at Goldco today. With their many years of helping investors just like you protect their hard-earned retirement savings, the experts at Goldco can guide you through every step of the process. With your new gold or silver IRA you’ll be able to weather whatever happens in the economy in the coming months, allowing you to rest easy knowing that your dreams for retirement will remain safe and protected no matter what.