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Once you have $300,000 in retirement wealth saved, you'll want to change your investing strategy. At this point, you'll want to protect some of the money you have saved while continuing to grow your retirement wealth. This should involve diversifying your holdings to avoid having everything invested in one place. If you suffer losses in one investment, you'll have the peace of mind of knowing that the rest of your wealth is secure elsewhere.
When it comes to maintaining a diverse portfolio, many people think of buying into a broad selection of stocks, bonds, and mutual funds. While these paper investments do offer the ability to maintain a diverse portfolio, there's a disadvantage to sticking with paper investments. They will all lose value in an economic downturn. Even though you might have your wealth spread out among several investments, you'll suffer a significant loss through inflation or a recession.
The same won't be true for gold. When you invest a portion of your wealth in gold, you'll be protecting that wealth from adverse financial situations. You'll also be growing your wealth over time without having to take much action. Here is why you should invest some of your $300,000 in gold.
How You Can Use Your 401k or Traditional IRA to Invest in Gold
You can start using your 401k or traditional IRA to invest in gold simply by choosing gold-backed investments. While the IRS' regulations prohibit you from using these funds to directly buy gold, you can invest indirectly in the gold market. The two main ways of doing this are discussed below.
Gold Mutual Funds
As you might already know, you can search for funds based on the industries in which they invest. You can choose funds focused on the healthcare industry or funds that invest in companies that manufacture smartphones. Similarly, a gold-focused mutual fund will allow you to invest in companies that work in the gold-mining industry. As new deposits of gold are discovered and mined, the funds will increase in value.
Gold Exchange-Traded Funds
An alternative is to invest in gold ETFs, which is possible when your 401k provides access to a broader selection of investments through the use of a brokerage firm. In this case, you can buy shares in a company that does hold physical gold bullion. Even though you won't directly hold or own the physical gold, you will own shares in a company that does maintain gold holdings. This can help you enjoy many of the benefits of investing in gold without physically owning precious metals yourself.
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What Are the Advantages of Owning Gold?
By opening a self-directed gold IRA, you can invest directly in gold. As this is a more complex process that involves rolling over your retirement funds, you may want to learn more about why you should consider this option. Here are a few benefits of directly owning gold in an IRS-approved depository.
Gold Appreciates Over Time
One of the greatest benefits of investing in gold bullion and coins is that it will naturally appreciate over time. While there are periods of significant inflation, we also experience gradual inflation over time, causing the value of everyday products to increase. That's why a two-bedroom house costs significantly more today than it did just five or 10 years ago. Similarly, gold appreciates over time. If you were to buy gold bullion today, you would see a favorable return on your investment in a few years.
Ensure Your Wealth Survives a Recession
As the value of the U.S. dollar drops, you'll see your paper investments lose value. This is a problem if all of your retirement wealth is stored in paper investments, such as stocks and mutual funds. You could end up losing a significant amount of money in a recession. If you're close to retirement age, you might not have the time to recoup those losses. However, gold gains value in a recession since it's a tangible asset and a rare metal. If you have some of your wealth invested in physical gold, you can counteract some of the adverse financial effects of a recession.
Combat Political Upheavals
When there's political upheaval, the value of currency and the availability of products will be negatively impacted. Gold withstands the effects of political strife on an economy since it remains constant. This is another situation in which the value of gold will increase, giving you more wealth when you will need it most. If necessary, you can liquidate gold easily and use the money to help you weather harsh economic crashes.
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What's Involved in Owning Retirement Gold?
As previously mentioned, there's a complex process that you will have to go through before you can start investing in gold bullion or coins. However, once you go through this process, you can invest your $300,000 in gold and protect it against economic losses in the future.
Look for a Gold IRA Company
Your first step in this process is to start looking for a gold IRA company. Later, you can read an overview of the top three companies in the industry. As you look at each company, pay attention to their years of service, reputation among investors, fee schedules, and the overall quality of service they provide. While you can change companies later if you feel the need, doing your due diligence in advance will help you to be happy with your first choice. A good gold IRA company will help you set up your account and assist with your 401k rollover, so be sure to ask about their startup process.
Roll Over Your 401k or Traditional IRA Funds
The most challenging part of this process is to complete the rollover from your 401k to your self-directed gold IRA account. You must make sure the IRS is notified within 60 days of the rollover or they will charge you income taxes and early withdrawal penalties on the amount. You can do a manual rollover, which involves receiving a check for the amount and physically depositing it in your self-directed IRA account. Most people choose a wire transfer. It's easier and faster, reducing the risks of miscommunication with the IRS. Once the rollover has been processed and your funds are available, you can begin buying gold.
Choose a Depository
The IRS prevents people from holding precious metals in their homes when those metals are a part of a self-directed IRA account. This means you will have to maintain a vault in an approved depository. You'll be given your own personal vault in much the same way that you might rent a safety deposit box in a bank. Your self-directed gold IRA company might be partnered with approved depositories to make it easier for their investors. Before choosing a depository, review their fee schedule, make sure your vault will be insured, and find out about receiving regular audits on your vault.
Buy Gold Products
Now you can start investing in gold with the funds in your self-directed IRA. An IRA gold company may sell gold and silver products that do not meet the IRS' standards for purity, so make sure you're only buying gold that can be included in your self-directed IRA. You can invest in bullion or coins. Your IRA gold company should provide you with educational resources and guidance in buying gold that will help you meet your retirement goals.
The 3 Top Gold IRA Companies
In any industry, you will find companies that offer excellent service and companies that are only focused on making sales. This is just as true with gold IRA companies. Before you choose to open an account with any gold IRA company, it can help to review what makes the top three companies stand out among investors.
This company stands out for providing customers with extensive educational materials in a multimedia format. Their library includes information about getting started with a self-directed gold IRA as well as general information about precious metals investing. They offer IRS-approved gold and silver products. Augusta primarily works with three top-rated self-directed IRA custodians: Equity Trust, Gold Star Trust Company, and Kingdom Trust. They are partnered with the Delaware Depository and they maintain an A+ rating with the Better Business Bureau.
As a promotional offer, Goldco is guaranteeing that customers won't pay any fees during their first year with them. They have a good library of educational materials and work closely with new customers to help them get started. In addition to gold and silver, they sell platinum and palladium, although these products may not be eligible for an IRS-approved self-directed IRA. They primarily work with Sterling Trust as their main IRA custodian and they partner with Delaware Depository. Goldco also maintains an A+ rating with the Better Business Bureau.
A top choice among investors, American Hartford Gold maintains excellent customer ratings with the Better Business Bureau and TrustPilot. This family-owned gold IRA company provides a simple setup process and in-depth customer service throughout the lifetime of the customer's account. Their IRA custodian is Equity Trust. They partner with Delaware Depository and International Depository Services.
What Your Gold Will Be Worth
As with any other type of investment, there are risks with investing in gold. Overall, gold appreciates over time, but there are also dips in its value occasionally. For this reason, you should keep a close eye on your holdings and on the market in general. Checking the market before liquidating your gold will help you get the best price for your precious metals.
Currently, gold is trading within a range of $1,800 to $2,000 per ounce. It dipped down to the $1,800 mark when Russia initiated its war against Ukraine and U.S. inflation rates started to climb. It has steadily increased in value to $2,000 per ounce since that time.
In the future, gold values are expected to rise considerably. The Federal Reserve plans to keep interest rates high to combat inflation, but, even so, financial experts predict inflation will continue affecting prices over the next decade. This will push more people to invest in gold, driving the value of that precious metal higher at a faster rate. This means gold values could rise to $3,000 per ounce or higher over the next 10 years.
How Much of Your $300,000 Should Be Invested in Gold?
Knowing what percentage of your retirement wealth to convert to gold can be a tricky issue to resolve. The answer will depend on your age, your retirement goals, and your level of income. As a general rule, someone in their 20s and 30s should only invest up to 15% of their wealth in precious metals. The rest should stay invested in a wide range of paper investments.
If you're in your 40s or 50s, you'll want to invest in more gold. Since you should be winding down your investing strategy, you'll want to protect up to 30% of your wealth by using it to buy gold. This will give you a good safety net as you continue to invest and grow your retirement wealth. If you do suffer losses with your paper investments, you'll still be able to fall back on your gold holdings.
After retirement, you might want to invest up to 60% of your wealth in gold. This will help you protect your savings against losses at a time when you won't be able to recoup much of your wealth. The gold you own will continue to gain value over time, helping you to see a modest return on your investment as well.
While you can and should still invest a percentage of your disposable income in paper investments, maintaining gold holdings will help you create a safety net. When currency is adversely affected in an economic downturn, the opposite effect will happen to your gold holdings. This means you'll maintain and continue to grow your retirement savings through most situations. Buying gold will help you secure your future.