Clicky

Why Investors Need A Gold Retirement Plan

Amidst the ongoing economic uncertainty, investing in the future is very much at the forefront of many people’s minds. Investors are becoming increasingly worried about whether the assets in their retirement accounts will hold their value, and provide them with an adequate retirement income. In the hope of improving their prospects for a comfortable retirement, more and more investors are realizing the benefits of a gold retirement plan.

The Problem with Most Retirement Funds

Most people’s retirement funds are held either in an IRA (individual retirement account) or a 401k, which is an employer-sponsored plan. The vast majority of these funds are invested in traditional assets like bonds, mutual funds, stocks or cash, all of which are affected in one way or another by the volatility of the stock market and of the economy. If your retirement fund is one of those that are dependent on uncertain external factors, like inflation or the performance of currencies and economies, you can have no certainty about how you are going to survive financially in your later years.

paper assetsThe problem is that bonds, stocks and mutual funds are paper assets, and don’t represent actual wealth held by yourself. The wealth is held by somebody else, and the paper represents a promise to pay you its value, at some time in the future. If the promise is broken, or if the value has sunk to nothing at the time you claim the promise, the paper is worthless.

Cash, on the other hand, could be considered a tangible asset, but the problem with a cash IRA is that it uses the US dollar as its investment tool. The US dollar is a fiat currency, and everyone is only too well aware of what has happened to the dollar in recent history — in fact, it has lost 97% of its purchasing power since the early 1930s. It is therefore most unlikely that a cash IRA will prove adequate to fund your retirement, as it continues to lose value at a relentless rate.

Why Tangible Assets Are Better

What investors need is a gold retirement plan — that is, a plan that is based, not on paper, but on tangible assets, which are guaranteed to maintain their worth, and are not dependent on promises from governments or companies. Since 1997, it has been permitted under IRS rules to invest in gold and other precious metals in an IRA. Any type of IRA can be used for precious metals investment, but only a self-directed IRA gives you the whole range of options, including holding physical gold.

silver & goldThere are major advantages in holding physical gold in your IRA, compared with holding traditional assets. Inflation is something to be dreaded in retirement — unlike working people, retirees are not in a position to increase their income, and they can only watch as the value of their savings is eroded. Of all assets, gold is the most resistant to inflation. Unlike the dollar, it has the same purchasing power as it had in the 1920s — an ounce of gold bought a quality man’s suit then, and it still does today. This what you need in your retirement.

In addition, gold has always been seen as a much safer investment than stocks, bonds or mutual funds, which are always affected by market instability. Gold is seen as the safe haven, which people buy when other asset classes look threatened. Its performance therefore has historically been in inverse correlation to that of the other asset classes.

One big benefit of an IRA invested in gold is the tax advantages it brings. Unlike the assets placed in a traditional IRA, the gold you purchase is not taxed, and with changes to tax codes and IRS limitations, a gold IRA becomes an increasingly beneficial option from the tax point of view. In addition, much less bureaucracy is involved in setting up a gold IRA, as you only deal with your custodian, who handles most of the administrative issues on your behalf.

How to Put Gold in Your Plan

There are various options for putting gold in your IRA. If you have a traditional IRA or a 401k, you can roll over into a gold IRA — although in the case of a 401k, you can only do this if you work for a different employer from the one that holds your plan, or if you qualify for distribution for other reasons. Alternatively, there is nothing to stop you opening a new self-directed IRA.

ira 401k rolloverWhether you use a rollover or open a new account, your first step is to select a custodian, or administrator, to look after your account. Most big banks offer administrator services, but it’s better to choose a company that specializes in gold investment. The custodian will usually deal with the transfer of funds on your behalf, including the forms and paperwork.

You also need to choose the dealer from whom you will purchase your gold or bullion. The decision as to what to buy is entirely yours, but there are some IRS restrictions. Gold bullion bars must be pure 24-karat, while coins have to be of at least 99.5% purity, such as American Eagle and Canadian Maple Leaf, and cannot be numismatic or collectible coins. Gold proof coins are allowed, but experts advise against buying them, as they carry a high premium which eats into your investment profits.

When you have decided on your purchase, the custodian will pay the dealer on your behalf, and will transfer the gold to a secure IRS-approved storage depository. Under IRS rules you cannot keep it yourself, until you meet distribution qualifications from your IRA. You can add to your gold every year up to the maximum contribution amount, but otherwise you have nothing else to do but watch your investment grow.

The steps to setting up a gold retirement plan are really very simple. However, these few simple steps can set you on the path to securing your financial future. This way you can take control of your finances, instead of being dependent on factors outside your control, and build security, protection and comfort into your golden years.