Retirement seems all fun and pleasant, not until you realize that you have no financial cushion to support your lifestyle in the years to come. Currently, retirement in the United States is considered a crisis (check here), with many income retirees having only a small amount of asset income to put into their retirement accounts. Hence, it’s no surprise that 92 percent of Americans are experiencing financial difficulties in their retirement years. In addition, the majority of them save less than they should, putting them at risk of having insufficient retirement funds.
However, the truth is that simply saving money will not be enough. As the rate of inflation continues to rise, as well as the stock market reaching record highs and lows, the value of the dollar continues to decline. Given that these recent years give us financial uncertainty following the pandemic worldwide, many people have little or no savings. Most of them find themselves struggling to find an asset that generates income.
Planning For Retirement
So, how do you plan on spending your golden years? If you want to live a comfortable and secure life before you retire, one of the most effective ways to stabilize your financial security is to invest. There are a variety of investment vehicles available to diversify your portfolio, ranging from stocks to mutual funds, real estate to precious metals.
You can invest for the short-term or the long-term, depending on your financial objectives. For example, if you are looking for an asset that pays dividends, stocks are a good choice. However, if you want to preserve your wealth, especially for your retirement years, you should consider investing in a gold IRA conservatively.
What Is A Gold IRA?
A gold IRA is a type of self-directed individual retirement account that allows you to invest in precious metals. You can either hold physical metals (not in your home, though) or invest in precious metal-related stocks and gold exchange-traded funds (ETFs). Since it is a self directed gold IRA, you have greater control over how you will strategize your investment planning. Generally, experts say that putting 10% of your portfolio in a gold IRA is already a good diversification approach.
Types Of Gold IRA
Like other standard IRAs, gold IRAs follow the same rules as them. With this account, you can invest your retirement funds based on specific tax treatment, which offers a unique set of tax advantages, including:
- Pre-Tax (Traditional IRAs)
In a traditional IRA, your account will be funded by pre-tax contribution, which has not been subjected to tax. This type of account is beneficial in reducing income taxes in your pre-retirement years. However, expect that you’ll be paying taxes for your account when you retire — particularly when you withdraw the money you invest and the profit you’ve earned.
You’ll know pre-tax is right for your portfolio if you expect that your income taxes will be lower in your retirement years.
- After-Tax (Roth IRAs)
For those who anticipate being in a higher tax bracket during their retirement years, Roth IRAs may be the better option for them. In this account, you will have to pay taxes now at a lower rate, and you can withdraw the funds in your accounts tax-free once you reach the age of 59 ½.
In addition, if you’re a high-income earner with higher contribution limits, you can take advantage of the tax benefits of this account, so you’ll have a tax break in the future. No one knows what the future will bring; you might be able to afford this right now, but not later on.
Precious Metals 101: An Overview
A gold IRA isn’t limited just only to gold. In fact, in this type of self-directed IRA, you can seek refuge in precious metals like silver, palladium, platinum, and other IRS-approved precious metals (link: https://www.investopedia.com/articles/basics/09/precious-metals-gold-silver-platinum.asp). Although they all have their own levels of volatility, many people believe their superiority as a long-term investment option for preserving and growing their value, especially when the stock market is experiencing turbulence.
More than that, precious metals aren’t known for being income-generating assets. Yet, many savvy investors classified these valuable metals as a safe haven and a hedge against economic downturns. And when your financial cushion becomes uncertain, you’ll have gold and other precious metals to back you up. Simply put, it can give you a balanced portfolio.
How To Invest In Precious Metals?
Setting up a self-directed account comes in four easy steps. However, it is only true when you transact with a reputable company that has expertise toward precious metals IRA. Since you can’t hold physical bullion in your home and other locations that aren’t approved by the IRS, a custodian will help you along the way.
The first step is to find a company. In which they will process in setting up your account. The next step is to fund your account. Depending on your choice, you can put money on your gold IRA through IRA transfer, rollover (401k to gold IRA), or by making cash distributions on your account through wire transfer. And then, you will have to select your metals, where you will invest in gold (learn more), silver, platinum, palladium, etc.
However, keep in mind that not all metals are accepted by the Internal Revenue Service. There must be some considerations, including the type and purity of the metal. In most cases, your precious metal company may sell IRS-approved metals, which you can purchase from them directly. In other companies, they may direct your custodian to a third-party precious metals dealer, who will then purchase the metals on your behalf using the funds from your retirement account.
Contrary to popular belief, investors are not permitted to physically possess gold IRA assets. This is because the Internal Revenue Service prohibits investors from physically possessing metals held in an IRA. They must be kept in a safe deposit box or storage facility. Despite this, you will have complete control over the storage space available. However, keep in mind that you may have to pay for fees, facility location, custodian, and insurance coverage as part of this investment.
Once you’ve purchased your metals, you will need to keep track of how well your metals are performing on the market.
