What Are the Benefits of Having a Gold IRA?

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If you have ever considered investing in gold, this is the ideal time to get started. Delaying will only put off critical time during which you could have been benefiting from owning gold. While you can use stocks, ETFs, and mutual funds to invest in gold, the most advantageous way to use your retirement wealth is by converting your savings into a self-directed gold IRA. This allows you to directly invest in gold, providing a tax-incentivized way to own gold.

Starting a self-directed gold IRA involves rolling over funds from your 401k or traditional IRA into a self-directed IRA. While this initial setup process may sound complex, there are gold IRA companies available to help you. Once you finish this process and you're able to start investing in gold, you'll enjoy the following benefits of owning gold.

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What Are the Benefits of Having a Gold IRA?

5 Benefits of Starting a Self-Directed Gold IRA

While you may already have personal reasons for wanting to invest in gold, there are several common advantages of opening a self-directed gold IRA. Here are a few examples of those benefits to help you determine if this is the right move for you.

Create a Truly Diverse Portfolio

When it comes to diversifying your investments, you might invest in stocks and mutual funds that focus on a wide range of industries. In most cases, that's a sufficient strategy to protect your investments as you grow your retirement wealth. However, a severe economic downturn, such as a recession, is going to affect the vast majority of these investments. Often, the market will lose value as a whole, and that could cost you most of your savings up to that point.

If you do suffer a significant loss through a financial downturn, your ability to recover may be limited. If you're relatively young, you might have enough time to reinvest and restore the savings you lost. This will still put you at a disadvantage in terms of forcing you to start over, but you will have time on your side. What happens if you're in your 40s or 50s when this type of event occurs? In that case, you may not have enough time to grow enough wealth for your retirement.

If you use a gold IRA to diversify your savings, you'll be better protected. By keeping up to 15% of your wealth invested in gold, you'll guard against significant losses. Since gold tends to gain in value during a recession, you will reduce your losses. The increased value of your gold holdings may even compensate you for the loss in value of your paper investments.

Maintain Better Control of Your Assets

When you join a 401k plan through your employer or open a traditional IRA, your ability to choose investments may be limited. In most cases, the fund manager will choose investments for you. While they are acting in your best interests, you may want to take control of your investment strategy. Especially if there's a legitimate concern over whether you'll have enough capital to fund your retirement, you may want to take on a more aggressive investment strategy. If your fund manager or financial advisor disagrees, you might not have any recourse.

The allure of a self-directed IRA is that it gives the investor much more control. You can decide how much of your retirement savings to roll over into your gold IRA. Once the account is funded, you can determine how much gold to buy and in what form. Different sizes and features of gold bars and coins will change their value, giving you the ability to choose gold products that will help you reach your retirement goals sooner. As you learn more about the gold market, you can take on a more aggressive strategy in growing your gold holdings.

What Are the Benefits of Having a Gold IRA?

Enjoy Steady Returns on Your Gold Investment

Since gold is a tangible asset, it grows in value gradually as inflation drives the economy over time. In the same way that real estate values have steadily risen from decade to decade, gold also increases in value with time. This means the gold you buy today will be worth considerably more the longer you hold onto it. Even if the value of gold dips from time to time, it will still be worth more than the initial amount you paid to buy it.

Additionally, changes in the economy positively affect the value of gold. When U.S. currency is at its weakest, gold values increase comparatively. This is because more people sell off their paper investments and seek to buy more gold to combat the weakening currency. Compared to a three-month government bond, the value of gold has increased by 7.87% since 2016, according to the World Gold Council. This demonstrates the durability of gold and the consistent returns you can expect when investing in gold.

Pay Less in Income Taxes

Since the IRS will charge income taxes and early withdrawal fees on money removed from a 401k or traditional IRA before retirement age, it's important to get professional help in rolling your savings over into a self-directed gold IRA. Once you complete the rollover, you can make tax-free contributions to your self-directed IRA just as would do with your 401k or traditional IRA.

When you do start liquidating your gold to take distributions at retirement age, you'll be charged at your marginal tax rate. Studies that have looked into gold IRA payouts found that investors earned higher after-tax rates of return than those who invested in gold via brokerage firms. This means you'll have more wealth to fund your retirement.

Gold is an Insurance Policy for Your Future

There's no denying that we live in uncertain economic times, and the volatile political stage only increases concerns for most people. If there is an economic collapse, paper money may lose its value completely. In that case, our society may resort to using precious metals as a source of currency. If you have been investing in gold, you will have the resources to survive a period of economic unrest. You'll be able to cash out your gold bars and coins or use them to barter for essentials, such as food and fuel.

Even in less extreme circumstances, owning gold will help you combat inflation and strengthen your financial situation. Similar to a recession, gold increases in value during these periods since more people will want the financial security that gold provides. You can use your gold holdings to supplement your income as prices rise, or you can cash in on the increasing value of gold to maximize your savings.

What Are the Benefits of Having a Gold IRA?

How Can You Get Started?

Before you can start planning a 401k rollover to a self-directed IRA, you'll need to choose a gold IRA company. While there are many options available, you can shorten your search by looking at the three highest-rated companies in today's market.

Each of these companies maintains the highest rating with the Better Business Bureau and several other consumer advocacy organizations. Customer reviews show that each company has an excellent reputation for providing honest, transparent, and helpful service. They offer comprehensive customer assistance from rolling over your 401k to learning the ins and outs of gold investing. They also partner with IRA providers and IRS-approved depositories to make it easier for you to use your retirement savings to invest in gold.

Closing Thoughts

As you review these advantages of having a gold IRA, keep in mind that you'll benefit from your gold more as you hold it for longer. Each gold bar or coin you add to your vault will increase your overall retirement wealth and your holdings will rise in value over time. This means you'll feel the rewards of owning gold long after you retire.