Today we shall be looking at the benefits of a Gold IRA. On multiple occasions, I have come across people who were looking for ways to invest in alternative assets and were trying to figure out why gold IRAs were popular in this domain. If you’re here because you’re also looking for information to help you decide as well, then you are in the right place. I will present to you the main benefits of investing in precious metals through a gold IRA, so hang in tight as we explore this interesting topic.
Gold IRAs in brief
It has been more than 2 decades since the IRS authorized the creation of Gold IRAs (1997). Even after the passing of such a significant amount of time, most Americans are yet to understand and know that the 1997 Taxpayers Relief Act gave them the capacity to take some or all of their funds from their existing IRAs, to purchase precious metals such as gold and silver for retirement investment.
With time, however, and as the world experiences more outstanding crises, it is clear that there is a good reason behind the provision to invest in precious metals being made. Let’s highlight some of them so that you can hopefully weigh your options as to whether a gold IRA is necessary for you.
Benefits of a Gold IRA
A precious metal IRA allows you to diversify your retirement investment portfolio
Diversification helps with the smoothing out of the volatility that occurs within investment holdings, with the objective being to enable an investor to get more stable and reliable returns over time. Simply hedging among a variety of stock investments over a given time horizon is not enough. This is a lesson that millions of Americans learned the hard way when their investments went up in smoke during the 2008 economic crisis.
Though we all hope that the economy will recover swiftly, it is the mark of a prudent investor to act with the understanding that paper assets are under numerous threats, such as:
- Massive government debt
- Quantitative easing
- The weakening of the U.S. dollar
- Geopolitical tensions
To effectively diversify within the alternative and tangible asset category, the distribution of funds across three investment sectors in the minimum is advised. This approach to the distribution of funds is more profitable in the long-term horizon since each asset class comes with its unique financial benefits. By purchasing three different types of coins, for instance, you open up the opportunity to maximize your returns.
Precious metals have in the past years proven to be a remarkably suitable investment for those who are looking for a safe haven. Individuals, governments, and institutions are all purchasing gold owing to its attributes.
Unlike paper assets such as bonds, mutual funds, and stocks, which may be devalued in the event of the occurrence of a crisis, the value of precious metals does not and cannot fall to zero. Nothing brings investors peace of mind than knowing that their retirement assets are safely stored in a secure vault and that their value will never fall below zero.
If you talk to most financial advisors, they’ll advise you to allocate your retirement savings to a defined selection of bonds and stocks. The downside of doing this is that this tactic ends exposing you to similar risks.
Gold is in comparison, correlated to bonds or stocks, and doesn’t present you with similar risk. It has a beta that’s sufficient to provide you with a powerful hedge against your primary assets ( your bonds and stocks). You need to recall that stocks can crash and burn by about 50% or 60%. Gold, however, cannot crash and burn, and cannot become valueless, since it is a physical asset.
Historically, gold has performed well in times of political instability, in the economic and political sphere. The world of gold generally follows an inverse relationship with the worth of paper assets. When traditional assets are all struggling, gold is usually doing well at that time. When gold isn’t doing very well, the paper asset market is usually booming. More investors are realizing this relationship between gold and paper assets, and are purchasing gold through reliable gold IRA service providers, in a bid to bring true balance to their retirement portfolio.
A gold IRA is in the real sense a self-directed IRA that gives you the capacity to make every decision related to the allocation and distribution of your assets. Such control is not granted in other types of IRAs, which is why gold IRAs are becoming more popular by the day. Besides giving you the control you need to move around your assets within your IRA as you please, a gold IRA also presents you with tax advantages.
High-quality retirement portfolio with an effective hedge against market forces such as inflation
When it comes to inflation, gold has always outdone or kept up with the globally accepted rate of inflation in the long run. A piece of gold that cost roughly $20 in 1917, would allow you to buy a fine suit in London or NYC. Fast-forward one century later, the same piece of gold cost about $1,000, and was sufficient to buy you a suit in London or NYC. If you had kept your $20, however, I doubt it’d be enough to even get you a high-quality shift to go with a suit.
The above example goes a long way to show how gold is a perfect store of value. As the U.S. dollar gets devalued by inflationary forces, the value of gold remains intact ( and even increases).
Interested about how you can purchase gold through a gold IRA to reap the above-highlighted benefits? Then you might want to check out the recommended gold IRA service providers below to get started:
That will be all for today’s article on the benefits of a gold IRA. I hope you found it beneficial, and that you’ll look into the possibility of owning this precious shiny metal. You can start by reading the reviews of the top-performing gold IRA service providers, then you can throw any questions you have my way.
I wish you well,
Eric, Investor and Team Member at Gold Retired!