A gold IRA can be a great way to not only save for retirement but to also protect wealth and purchasing power. Although this account type may sound complicated for those who are not familiar with it, they are actually quite simple to set up and maintain. Like any other investment, there are numerous choices available when it comes to products and providers. Taking the time to do some research and due diligence can go a long way towards making the investment stress-free and convenient. Here are a few tips to get you started:
Choose a Provider
In order to set up a gold IRA, you must determine where to buy the gold and who will act as the custodian of the account. There are some companies that handle all of this for you, making the account setup and maintenance simple. If you have no idea where to start, you can google the phrase “buy gold ira” and a list of companies should come up in the search results. This gives you the opportunity to compare companies and offerings.
New Account or Rollover?
It can be started as a brand new account and funded with an annual contribution according to IRS guidelines. What many people do not know, however, is that an old 401k or IRA account can also be rolled into a gold IRA. This process must be done carefully, because if a mistake is made it can trigger a taxable withdrawal. Company should be able to assist you with the rules and procedures while making sure you stay in compliance. Of course, any tax questions should be directed to your tax professional.
Decide How Much to Allocate
Allocating gold to an account can be done for a variety of reasons. Some investors may want to diversify an existing stock or bond portfolio with alternative asset classes, while others may be more concerned with hedging a weaker dollar or geopolitical risks. Whatever the case may be, the investor can decide on an allocation strategy based on their risk tolerance, reason for investment, time horizon and overall objectives. For some investors, this might mean an allocation of 5 percent. For others, it could mean an allocation of 25 percent or more.
Choose Products
When looking to allocate investment capital into gold, buyers may have a variety of products to choose from. All products must be approved for inclusion in an IRA account according to IRS guidelines. These products may include gold coins, bars or other products. Coin prices can vary greatly depending on the type of coin. A standard bullion coin may be less expensive than a collectible coin. Gold bars, on the other hand, may be generally cheaper compared to coins. Both products can play a key role in a portfolio, but cost is something that you will want to consider. For investors interested in acquiring as many total ounces as possible at the best possible price, larger gold bars may potentially be the best way to go.
Consider The Risks as Well as Possible Upside
All investments carry some degree of risk. A gold IRA is no different. The price of gold could potentially go higher, much higher. Prices could also decline sharply. Each buyer needs to carefully consider their tolerance for market risk and portfolio volatility.
In addition to the investment risk, potential buyers also need to consider the rules and regulations of this account type. Early withdrawals can be heavily penalized while also having tax consequences. Rules can and do change, and investors also need to stay on top of any changes to maintain compliance and to get the most out of there accounts.
Focus on the Long-Term
A gold IRA is designed as a long-term investment. This does not mean that someone with a few years until retirement cannot use this account type, but it does mean that there can be major ups and downs in value. Investors that are more concerned about the years and decades ahead may not be as concerned about normal volatility, and they understand that some ups and downs are to be expected. A long-term time frame not only keeps investors “seeing the forest through the trees,” but it can also allow them to take advantage of the numerous potential benefits of a gold IRA including the opportunity for tax savings and tax-deferred growth.
It can be a very powerful way to save and can provide numerous potential benefits. These accounts also have risks, however, and interested investors should do their homework before making such an investment. Given the potential tax savings and the opportunity for tax-deferred growth, it may be the best way to gain exposure to this asset class.
