What Is A Gold IRA?
A Gold IRA, also known as an Individual Retirement Account allows a person to invest in a tangible portfolio through the purchase of gold. Unlike other investment portfolio that are composed of contracts, documents, and stock certificates, Gold IRA investors place their purchase of physical gold in IRS accredited vaults.
Investors are not allowed to hold their gold investments. Instead, Gold IRAs are stored in vaults until the plan holder reaches the age of 59 ½ or 60 years old. When the investor reaches the retirement age of 60, the Gold IRA can either be sold and converted into cash or re-invested.
Investors and plan holders have the freedom of choosing where to invest, whether in gold coins, bars or gold shares. Also, investors can simply transfer portions of their existing investment like their mutual funds and convert it to Gold IRA. This transaction is known as a Direct Roll-over in which a person can convert his/her retirement plan like 401(k), pension plans and savings account into tax-free Gold IRA.
Gold IRA is available in the form of gold bars, gold coins, and even gold shares in the stock market. The following are also allowed in the IRA: platinum, silver and palladium. What are the advantages that come when investing in Gold IRA? Check out the list below:
Gold is unaffected by Inflation
The value of gold is not affected by inflation, unlike investment options that involve paper money. Currencies and their buying capacity are the first affected by the consequences of inflation. The money saved by people decreases in terms of its buying power.
For example, to date your $100 dollar bill can buy three bags of groceries. In the following year (2015) the $100 bill’s buying capacity depreciates. It can only buy two bags worth of groceries. While your $100 dollar worth gold increases as the years pass by. One year from now, your $100 worth of gold will have a market value of $150.
Gold’s value strengthens over time.
Selling price of Gold is less than its acquisition cost
The selling price of gold still costs less than its acquisition and production cost. People are drawn to buying gold for this reason. They buy when the price is low and hold on to their gold. Some may decide to resell, and they earn 2x or 3x the acquisition cost.
Gold is one of the few investments that can easily be liquidated.
It doesn’t lose value amidst recession
Gold remains unaffected even when a recession hits the market. While almost everything gets affected like price increase and job lay-offs. Gold is considered as a safe investment during these times. It does not lose value.
It has also been proven that after a recession, the price of gold increases by 100% or more.
Gold IRA has many tax-benefits
When you invest in Gold portfolios, these are tax-free including rollover investments. Also, when your IRA reaches maturity and you decide to cash-out your investment, you’ll pay lower a lower tax compared to other forms of investment.
You earn more, and your tax deduction is much lower.
Investing is easy
Investors have the options of opening an online IRA account or a physical account similar with the banking system wherein you’ll have paper copies of your balance statement, contracts and other documents. You will need to consult with a reputable Gold investment company to open an account.
Safest form of investment
Since gold is unaffected by inflation and currency depreciation, it remains as the safest investment platform. Unlike when you invest your money in the bank, in the event it declares bankruptcy you’ll only receive a small amount of money. Also, if you keep your money or gold in your house, there’s always the possibility of it being stolen.
IRA’s are intangible; therefore it is safe from being stolen.
Gold investments are limited
One of the factors that increase the value of gold is its availability. It takes 5-10 years for mining companies to introduce new supplies of gold in the market. That’s why wise investors choose to buy gold whenever it’s available because the demand for it rises throughout the years.
Demand is on the rise
Demand for gold either for investment or jewelry use has increased in the last five years. In China and India, these countries bought anywhere from 1,000 to 1,500 tones of gold in 2013 alone. Electronic companies need gold in their chips and semi-conductors.
There is a foreseen rise in the demand of gold both for civilians and companies.
Self-Directed IRA
Investors have 100% control of where to invest their money. They can ask for advice from their gold brokers, but at the end of the day, the decision lies in the investor’s hand. Unlike in traditional portfolios, bank managers or financial planners are the ones who decide where to put your money.
In self-direct IRAs, investors can own physical gold along with silver and stocks while having the perks of a tax-deferred account.
So, how to get started with Gold IRA?
- Choose a reputable IRA broker company.
Compare at least 3 companies. Do a background check and verify how long they’ve been doing this type of business. You want to work with an experienced broker, who can grow your money and portfolio. - Fill-out necessary documents.
Once you’ve chosen a company, they’ll give you a list of requirements and forms needed. Carefully read the form and contract. If there are things or information that you don’t understand in the contract, ask your broker to explain it to you.
Some companies allow these forms to be scanned and emailed. While others require you to be present in their office. - Choose where to invest.
Once your account is activated, you can now choose which company to invest from. This is also the time to do a Direct Roll-over if you have other investment platforms.
If you’re still undecided which type of gold to buy, you can always ask your broker. They will guide you in building a profitable and stable portfolio.