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As you start saving for retirement, you'll want to protect the wealth you grow as you continue to grow more savings for your future. It can be difficult to reconcile these two objectives since growing wealth requires taking some risks with your money. A strong retirement investment strategy will help you achieve those goals through diversification. Many investors look to gold to help them grow and protect their wealth simultaneously. If you're not sure about investing in gold, a closer look at how owning gold in a self-directed IRA is beneficial can help you make up your mind.
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How Can You Invest in Gold?
There are publicly traded companies that mine and process gold, and this is a good way for novice investors to start indirectly investing in gold. However, those types of investments won't provide all of the benefits of owning gold directly. Since the IRS prohibits owning physical assets in a 401k or traditional IRA, this is as close to investing in gold as many investors ever get.
The better alternative is to own gold directly. Although you can't do this with your 401k, you can start a self-directed gold IRA and roll funds over into that new account. This involves working with a gold IRA company to choose a self-directed IRA custodian and IRS-approved depository. Many gold IRA companies offer assistance that will help you with the account setup and your 401k rollover. The professional help they provide in working with your 401k administrator will help you avoid making errors that could result in IRS penalties.
Once your account is set up and funded with your retirement savings, you can begin using those funds to buy gold. Your gold IRA company will sell gold bars and coins that meet or exceed the IRS' requirements for purity. Once you place your order, the gold IRA company will provide secure and insured delivery to your vault in the depository you have chosen. Many depositories have websites with online portals where their clients can review the contents of their vaults. This will help you ensure your gold is protected, and you'll receive market updates that help you see how your gold's value has changed.
You can keep your gold in your vault for as long as you choose as long as you keep up with the maintenance fees charged by the depository. Be sure to find out in advance how the fees will be assessed by your depository. Some facilities charge their fees based on the value of the gold in the vault while others simply charge a flat fee each month. Consider how you want to pay the depository in choosing the right facility for your gold.
Why Gold IRAs Are the Better Investment
If you have never owned gold, you might not know why so many investors are dedicating a percentage of their savings to this precious metal. The following reasons to buy gold with your retirement money demonstrate how gold will help you earn more wealth while protecting your existing savings.
It Holds Its Value
In rare cases, the value of gold will temporarily drop, but it always bounces back. This can be seen when you look at the history of the gold market across several decades. In addition to retaining its value, gold becomes worth more over time. This means you can hold onto the same gold throughout your life and it will be worth more in the future. You can even pass it on to your children and trust that they will have something of value to start their own retirement savings.
Gold is Versatile
As a physical asset, gold can never be destroyed, proving that it's a long-lasting and reliable source of wealth. Even though you can't destroy gold, you can change its appearance. You can melt it easily with an open flame and forge it into smaller bars, coins, or jewelry. This high versatility makes gold even more valuable as an asset because it can be broken down into smaller pieces. If you need to use your gold as a form of currency, you'll be able to make coins with it to spend on necessities. You'll be able to spend what you need while keeping the rest of your gold for your future needs.
It Combats a Weakening U.S. Dollar
The U.S. dollar is a global currency and, as such, it is often compared to foreign currencies. When the U.S. dollar weakens and foreign currency becomes more valuable, investors in the United States turn to gold. As a result, the demand for gold rises and its value also rises. One recent example took place between 1998 and 2008. Within that decade, the U.S. dollar weakened and drove the demand for gold higher. This resulted in a rise in the value of gold, bringing it to nearly three times its pre-1998 worth.
Gold Reacts Differently to Inflation
When we experience the onset of sudden inflation, the cost of everything rises, and people struggle to keep up with their monthly expenses. The brighter side to inflation is that physical assets also increase in value throughout these periods. If you own gold bars and coins, those items will be worth more in an economy that's experiencing accelerated inflation. Even though paper currency will lose value, the value of gold will counteract the effects of inflation. This means you can use your gold to help you deal with the harsh conditions that inflation creates.
It Protects Against Deflation
Although it's rare, deflation does occur from time to time. The most recent example is the Great Depression, which took place in the early part of the 20th century. During a period of deflation, prices drop and people stockpile any extra cash they have on hand. During a period of deflation, people invest their cash in gold as a means of preserving their savings. This creates a higher demand for gold, driving its value up quickly in a short period of time. If you already own gold, this is a good time to sell it for a higher profit.
Gold Provides Protection From Geopolitical Strife
When there are significant changes in the political structure of any country, the citizens in that country lose confidence in their government. This translates to a loss in confidence in the country's currency as well. As a result, people use their savings to buy more gold, fearing the collapse of paper currency. This is another situation in which there's greater demand for gold. Additionally, if the paper currency does lose value, you'll have the resources to weather that period of uncertainty. Your gold can be used in place of cash to help you deal with the fallout from geopolitical changes.
Gold is a Rare Precious Metal
While there are many reasons that gold is considered a precious metal, its scarcity is one of the driving factors for its worth in modern civilization. In fact, gold mining has slowed since 2000, suggesting that there are fewer places where gold can be mined. Even when a new deposit of gold is discovered, it can take up to five years to build a mine and begin sourcing that gold. Throughout a period of slowed or stagnate gold processing, the value of existing gold will rise considerably.
It Helps You Diversify Your Portfolio
Diversifying your paper investments into several different industries or areas of interest will help you protect yourself if one of those industries is adversely affected by some event. However, a market-wide crash will negatively impact the value of all stocks and funds in your portfolio. This can result in a significant loss, and it may take you years to recover from it. If you stored 15% or more of your wealth in gold, those savings won't be affected. You can use your gold investments to help you protect some of your retirement savings so your losses won't be as devastating.
3 Top Gold IRA Companies
If you’re ready to start investing directly in gold, your first step will be to find a gold IRA company. There are many companies that sell gold to investors, so it’s important to look at a variety of factors. Rather than letting yourself feel overwhelmed, it can help to look at those companies considered to offer the best services in the industry. The following companies top the list of reputable gold IRA providers with high customer satisfaction ratings.
One of the features you’ll want to consider when evaluating gold IRA companies is how fees are charged. Augusta provides an honest and transparent fee schedule that anyone can view, and they are known for keeping their fees low. They charge a $50 fee to start your account. The administrative fee varies based on the balance in your account. If you have $100,000 or lower, you’ll pay an annual fee of $75. If you have more than $100,000 in your account, you’ll be charged a $125 fee each year.
In addition to transparent fees, Augusta Precious Metals provides customer assistance throughout the lifetime of your account. This service is especially helpful if you’re unfamiliar with the process of doing a rollover from your 401k or traditional IRA. They also provide educational materials that will help you learn about investing in the gold market. They offer a competitive buyback program to ensure you can liquidate your gold quickly and easily.
This company has a strong history of building relationships with their customers. In addition to providing modest fees, they assign account representatives to their customers and maintain an extensive multimedia library. The account representative can walk you through the process of opening your account and rolling funds over into it. You’ll also be able to request a free startup kit before you open your account. The kit will feature materials that will help you learn about the company’s services and the generalities of investing in gold.
Goldco offers a wide range of gold and silver products that meet the government’s requirements for fineness. They partner with a U.S. depository for the convenience of their customers, and they can help you choose a self-directed IRA custodian. Their media library includes materials that will help you gather up-to-date information about the gold market. Their website provides a customer assistance phone number so anyone can contact them and request more detailed information.
Founded in Los Angeles more than two decades ago, American Hartford Gold has grown into a large gold IRA provider in a relatively short time. Their high quality of service and low fees have made this company a favorite among investors. When you get started with them, they will send you a free investor’s kit that includes information about investing directly in precious metals. They also provide free assistance in completing a rollover from your 401k or another retirement account.
American Hartford Gold offers a buyback guarantee to ensure every customer gets the best prices for their gold relative to the market. When you open an account with them and make a qualifying deposit, they will give you $10,000 in silver as a bonus gift. While they don’t list their fees on their website, they will provide any information you request when you call their customer service team. Like the other companies, they also recommend IRA custodians and depositories for your convenience.
While some people wait to open a self-directed gold IRA until they reach their 40s or 50s, it can be advantageous to open this type of account earlier in life. Your gold IRA will give you a place to store some of your retirement savings as you continue to pursue more wealth. Having that gold IRA in place in your 20s and 30s will give you a financial safety net that you can rely on as you use more high-risk/high-yield investments with the other portion of your savings. When you do reach retirement age, you can roll everything over into your self-directed gold IRA for added convenience.