There are several alternatives for investing for your retirement. This post is going to look at what´s best between a gold IRA vs physical gold. You can choose to buy physical gold or invest in a gold investment retirement account. A gold IRA is a means of turning your retirement into gold and is a good way to protect your retirement account from inflation and volatility of the market.
There are several things to consider before you decide whether you should invest in a gold IRA or physical gold and some of the conditions that will determine your decision. Some IRA accounts, for instance, will not allow you to invest in physical gold, which means that you’ll have to look around for the right IRA.
**See my top-5 list of gold & silver IRA providers on this page
A gold IRA is a retirement account that has been approved by the IRS and works just like any other IRA. It does not limit your options regarding assets that you can invest in. As such, you have the advantage of being able to invest in physical gold bars, coins, and other precious metals such as silver, platinum, and palladium.
Benefits of a Gold IRA
A gold IRA allows you to diversify your retirement portfolio so that you will be able to defer payments of tax and get preferential treatment. As such, rolling over some of your IRA into a gold IRA will not bring any tax requirements to you.
You can also start a gold IRA account and benefit from annual deductions, usually between $5500 for people below 50 years and $6500 for people above 50 years. It is also important that you work with the right partner to start a gold IRA.
You have to adhere to plenty of regulatory requirements, and avoiding tax pitfalls requires advice from an experienced party. Following are some other reasons to invest in a gold IRA.
1. Portfolio Diversification
When you invest a bit of your retirement in precious metals and physical gold, you will have a more diverse portfolio in the form of an asset with a reputation for protecting your funds.
Whenever the markets, currencies, and governments are not performing as well as you would want, a gold IRA maintains the value of your retirement and keeps your investment relatively stable. This is an important layer of diversification that ensures that your retirement is in safer investments with reduced risks of volatility and inflation.
2. Protection Against Deflation and Inflation
Inflation has been known to erode investments over time. You can easily hedge against inflation and deflation by investing in gold for your retirement. Your investment portfolio will also be immune from the effects of inflation.
Gold and precious metals have been proven to have the greatest profit potential, and as such, they can give you the best return on your investment.
Gold is also a store of wealth and has been used for this exact purpose for many years in history. The value of gold has also been climbing over the years, even when the economy is tough.
As such, it is a useful addition to your retirement portfolio and can be used to protect your assets from inflation and other economic and political conditions of the day.
Preserve and Diversify your Assets with a Gold IRA
It is simple to get back in charge of your retirement savings. All you have to do is open a self-directed IRA, and as such, you will be making your own investment decisions.
You also get to choose bars, bullion, and gold coins that the IRS has approved to ensure that you have the same security and weight as real tangible assets. You can also move your existing IRA into a gold IRA to get tax benefits and ensure that your retirement portfolio is more secure.
Types of Gold IRA Accounts
There are three types of Gold IRA accounts:-
1. Traditional Gold IRA
This is tax-deferred savings account for retirement and works in the same way as other IRAs in terms of taxes. Your gains and contributions will not be taxed. According to the IRS, the annual contribution limit for these accounts is $5500 for people under the age of 50 and $6500 for those above 50 years old.
2. Roth Gold IRA
This is similar to an after-tax retirement savings account and has the same functionality as any other Roth IRA. There are usually no tax deductions made upfront for your Roth contributions, and you also won’t need to pay taxes down the line once you start to take your cut after retirement.
**See a detailed Roth IRA vs Traditional IRA comparison on this page
3. SEP Gold IRA
These IRA accounts are available to self-employed people and business owners. It works similarly to traditional pre-tax IRAs since all contributions will not be taxed. However, it comes with the added benefit of having higher contribution limits.
Unlike the typical $5500 limit, you can contribute up to 25% of your income or $53,000, depending on which one is less.
You can open any gold IRA account depending on your requirements and whether you qualify for the account. For instance, if you are a business owner or are self-employed, it would be better to go for a SEP gold IRA since it has a higher contribution limit.
As such, you will be able to save more from the profits made by your business which means that your retirement account will have more money in store for you when you eventually retire. Opening the gold IRA account also gives you other benefits and advantages that you would not typically get from typical retirement accounts.
As such, you should go for the gold IRA account that matches your preferences and takes care of all your needs. You should also learn about the requirements for opening each account before opening it to ensure that you have an easier time making use of it in the long run.
Funding your Gold IRA Account
Once you have opened the gold IRA account, it is easy to fund it. You can fund your gold IRA using any of the following methods:-
1. IRA Transfer
This is as simple as completing a Transfer Request Form to enable your transfer to be made on a penalty-free and tax-deferred basis. This will enable you to transfer your IRA into a new IRA, and you will not have to pay tax when you are making the transfer.
You can make a direct rollover from any other retirement plan such as a 401(k) to fund your gold IRA. This is usually on a tax-deferred basis and accords you with special benefits.
3. Cash Contributions
You can also make use of cash payments to fund your gold IRA. This is usually in the form of wire transfers and checks. The decision on whether your deposits will be taxed usually depends on the type of IRA account you have. Traditional IRAs are pre-taxed, while Roth accounts work on an after-tax basis.
One limitation that you will often face when funding your account is that you will not be able to fund it with the gold bullion and coins you already own. The IRS can only allow certain bullion and coins to be held in IRA, which means that not all gold will be accepted.
As such, you must learn about the IRS-approved coins, bars, and bullion, as well as the depository where your precious metals will be stored. This will ensure that you know which coins to use and fund your account with actual gold.
This selective process ensures that all the gold meets minimum requirements which means that it will have a better value in the long term. Following are some of the bars and coins that the IRS has approved for use in Gold IRA. They must have a finesse of 99.5% or higher.
– American Eagle and American Eagle Proof Coins
– American Bufallo coins
– Canadian Maple Leaf coins
– Canadian Arctic Fox
– Australian Kangaroo coins
– Chinese Panda coins
– Credit Suisse bars
The silver coins and bullion are required to have .999 finesse or higher. For palladium and platinum coins, they must have a finesse of 99.95%. With this information, it will be much easier to determine whether the gold, silver or other precious metals you have the quality to be used to fund your gold IRA or not.
** You might also want to read my post on the top-5 picks of gold coins by investors, and more importantly the post about what numismatic gold coins is as that is a common way to get scammed when buying gold & silver coins
Physical gold can be used to save for retirement, and it is the best way to store value over a long period. When you are using physical gold, you will protect your assets from the effects of inflation and other unpredictable political conditions.
Even when the other currencies are unstable, gold is always climbing, and its value does not vary as much as the other assets used for investments. For this reason, it is much better to store physical gold for your retirement since you will be sure of the same value even after you have retired.
The value is also known to appreciate over time, and as such, you will be able to make a good return on your investment after some time has passed. This is especially important when you are saving for your retirement since the rising value of the gold means that you will have a relatively stable asset to work with when you retire.
Depository storage is usually the best way to store your precious physical metals. The following are ways you can store your gold in preparation for retirement.
Depository Storage Facility for gold
This third-party storage facility has insurance for all the precious metals in their storage. As such, you are completely insured against all loss, theft, and damage of your precious metals. The facilities also feature highly advanced security tools and mechanisms such as automatic locks, timed locks, and monitoring round the clock.
There are also motion sensors and sound detectors installed to ensure that all your precious assets are safe and secure at all times. The depositories are responsible for all risk insurance, and as such, they are required to always maintain a $1 billion insurance coverage through Lloyd’s of London.
Gold and other precious metals in a retirement account must be in the custody of a custodian that the IRS has approved and in a depository storage facility until they get withdrawn after the predefined retirement age has been reached.
Whenever you use depository storage to store your precious metals, you will be sure they are always fully protected.
There are also additional layers of security for any depository. Once your products have been received, they will first need to be inspected, audited, and keyed into a database specifying the quantity, weight, and type before being stored securely.
Top Depository Storage Facilities
Following are some of the most popular depositories for the security and storage of precious metals:
Physical Gold Characteristics
Physical gold is the actual metal that can be in your physical possession and is also more portable than other forms of assets. It is also considered a safe way to keep value, and as an asset, it can prove useful during market crashes. In terms of liquidity, physical gold is very liquid in all kinds of market conditions.
There are no annual fees associated with the ownership of gold, and you only need to pay a dealer premium at the time of purchase. You are, however, required to report your ownership of gold since it is regulated by both the SEC and FINRA, and when you are opening an account, personal information will be required.
These are some of the characteristics that might make some people prefer storing actual gold compared to opening a gold IRA.
With physical gold, it becomes easier to get through tough financial times. With the liquidity in gold and other precious metals, converting it into commodities and other assets under uncertain financial and economic times is easier.
There are no restrictions regarding the gold that can be stored physically, which means that physical gold stored in a depository has advantages over a gold IRA.
This means that you can get through difficulties with more ease whenever you have gold. It is recommended that your retirement portfolio has at least 10-20% allocated to gold and other precious metals for greater diversification.
It is important to save for your retirement, and there are several ways to do this. For instance, you can start investing in real estate or even open a 401(k) account. However, other more secure means of investing for your retirement are not affected by varied market conditions and will hold value for much longer.
Gold IRA and physical gold are some of the best and most ideal investments for your retirement as they do not depreciate and remain relatively stable even in the middle of tension and political instability.
Saving into a Gold IRA also provides tax benefits and diversification of your investment. Additionally, you can also store physical gold for your retirement, which will enable you to have the same value stored over a longer period.
Gold increases in value as you store it for longer, and whether you are keeping this value in a Gold IRA or the physical gold, you will have an assured means of livelihood and sustenance when you finally retire.
I hope you found this short post on gold IRA vs physical gold to be helpful and that you now have a better understanding of the subject. Please share your own experience or thoughts in the comment section below! Also, if you got any questions about all this then I would be more than happy to answer them below!
I wish you success!
Michael, founder of Gold Retired