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Mitt Wilson

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We understand how easy it can be to get overwhelmed by the sheer number of options out there when it comes to retirement investment options.

Gold has long been an investment valued by many smart investors, and met with suspicion by some who didn’t understand it or didn’t understand their options when it came to investing.

The good news is you have some great options when it comes to investing in gold, with a Gold IRA being one of our favorites.

Investing doesn’t have to be intimidating, there’s no reason to have anxiety.

When we guide you through the Gold IRA investing process you can get the safe investment of gold added to you portfolio and let that investment anxiety fade away.

Let’s dive in!

Why Invest in Gold?

a gold chart with an arrowing going up

Gold is a valuable commodity that has been used as a form of currency, jewelry, and investment for centuries. Gold is unique in that it is not subject to the same volatility as other investments, such as stocks and bonds.

The price of gold is based on supply and demand. When demand for gold is high, the price of gold goes up. When demand for gold is low, the price of gold goes down.

This isn’t unusual but what is different about gold is demand.

There is always some level of demand. This is part of the reason that gold can be such a safe investment and why it has long been considered a good way to protect wealth in uncertain economic or political times.

Gold is always going to have value somewhere, and during rough or tumultuous economic times the demand for gold tends to go even higher.

Gold is also traditionally serving as a hedge against inflation. This means that as the cost of goods and services goes up, the value of gold tends to go up as well.

Gold is a valuable commodity that has many uses. Investing in gold can be a great way to diversify your portfolio and protect your wealth.

What is a Gold IRA?

A Gold IRA is an individual retirement account that allows you to hold physical gold bullion in your portfolio.

Gold IRAs are self-directed, meaning you have the freedom to choose which assets to add to your account and when to buy or sell them.

This also gives a way to invest in ownership of actual gold in countries or locations where there is a limit on how much an individual is allowed to legally physically hold. This also allows piecemeal investment.

Not everyone has the money to invest $1,800+ per ounce for even a few ounces of gold all in one sitting, especially if the goal is 1-2 pounds (16-32 ounces). However, by investing in a Gold IRA over time that investment can add up in considerable ways over the months or years.

Why Invest in a Gold IRA?

There are many reasons to invest in a Gold IRA. For one, gold is a proven hedge against inflation and economic uncertainty. Over the long term, gold has outperformed stocks, bonds, and other traditional asset classes. Gold is also highly liquid, meaning it can be easily bought and sold without affecting its market price.

Another reason to invest in a Gold IRA is to diversify your portfolio. By including gold in your portfolio, you can protect yourself from the volatility of the stock market and other traditional asset classes.

Gold IRA Pros and Cons

a gold scale

While many smart investors are frequently bullish on gold, it’s worth acknowledging that every single form of investment is going to have its pros and cons.

Now that we’ve answered the question “What is a Gold IRA?” let’s take a look at the full list of pros and cons of investing in one.

Pros

There are many benefits to investing in a Gold IRA. Here are some of the most significant ones:

1. Hedge Against Inflation and Economic Uncertainty

One of the main reasons to invest in gold is to hedge against inflation and economic uncertainty. Over the long term, gold has outperformed other traditional asset classes like bonds and money markets. There have even been multiple times in the past where for years or decades gold even outpaced stocks.

Since gold is seen as a precious metal that will always have value, and thus always have some degree of demand, if a currency loses value or even hyper inflates, the gold will just be worth that much more currency. This is a great protection from a currency losing value because the gold will remain valuable accordingly.

2. Diversify Your Portfolio

Another reason to invest in a Gold IRA is to diversify your portfolio. By including gold in your portfolio, you can protect yourself from the volatility of the stock market and other asset classes.

Diversification in stocks, bonds, money markets, or even businesses or collectibles can only do so much. Having some of your retirement portfolio tied to a steady value precious metal like gold is a great way to further diversify and have some of your portfolio in something that will always retain at least a little value – if not straight up increase while the rest of the economy struggles.

3. Liquidity

Another benefit of investing in a Gold IRA is liquidity. Gold is a highly liquid asset, meaning it can be easily bought and sold without affecting its market price.

This is because of the constant demand for gold no matter what the markets are doing. There’s always someone willing to buy gold so it’s always possible to move gold for cash if you find yourself in need of more cash on hand.

4. Tax Benefits

Investing in a Gold IRA also comes with some tax benefits.

For example, the Internal Revenue Service (IRS) allows you to defer taxes on the gains from your gold investments. This deferment can be a major boon for investors, especially those early on in their investment journey.

There can be other tax benefits, as well, but talking to an accountant would be the proper way to learn more.

5. Portability

Another benefit of investing in a Gold IRA is portability. Unlike other retirement accounts, such as a 401(k), you can easily transfer your Gold IRA to another provider if you choose to do.

There’s no need to liquidate it and then re-invest (after taxes and penalties) into a new account.

Cons

While we’re bullish on the many benefits that investing in a Gold IRA can profit you, we’d be remiss if we didn’t look at some of the potential drawbacks to investing in a Gold IRA. While these pale in comparison to the benefits for most investors, they are still important to understand before investing.

1. Setup and Maintenance Costs

One potential drawback of investing in a Gold IRA is the cost of setting up and maintaining the account. You will need to open an account with a custodian that specializes in gold IRA investing. There may also be annual fees associated with maintaining the account.

While this can be intimidating, we know how to find the best gold IRA providers, because that can make a huge difference in long-term results.

2. Taxes

Another potential drawback of investing in a Gold IRA is the taxes you will owe on your gains. The IRS taxes gold at the capital gains tax rate, which is currently 20% as of 2022. For some people this may seem like a lot, but for many others it will be lower, especially if major income is made via employment or self-employment.

While taxes can be deferred, they do have to be paid eventually. No getting around the tax man.

3. Early Withdrawal Penalties

If you withdraw funds from your Gold IRA before you reach retirement age, you may be subject to early withdrawal penalties. The IRS imposes a 10% penalty on withdrawals made before age 59 1/2.

So while these investments can be liquified quickly in emergencies because of the high demand, they can’t be done without penalty.

How to Invest in a Gold IRA

Now that we’ve answered the question “what is a Gold IRA?” and looked at some of the pros and cons of investing in one, let’s take a look at how to actually invest in a Gold IRA.

The first step is to choose a custodian for your account. There are many custodians that specialize in gold IRA investing, and we are always happy to help find that perfect connection for our clients.

Once you’ve chosen a custodian, you will need to open an account and fund it. You can fund your account with cash, stocks, or other assets. Once your account is funded, you can begin buying gold. You can purchase gold coins, bars, or ETFs.

Once you’ve purchased your gold, it will be stored in a segregated account at a custodian-approved facility. Your gold will be fully insured against theft or loss so you won’t have to worry about those expenses.

When you’re ready to retire, you can take distributions from your account. You can choose to receive your distributions in cash or when possible even in the form of gold.

If you choose to receive your distributions in gold, you will need to find a buyer for your gold. There are many buyers that specialize in buying gold from retirement accounts.

The Bottom Line

Investing in a Gold IRA can be a great way to diversify your portfolio and hedge against inflation. There’s a reason that gold has been a valued commodity since the beginning of organized human history. Gold has long been valued and that safety of a metal that has kept value for over 6,000 years of recorded history is the very definition of a safety hedge.

A Gold IRA takes a precious metal that would otherwise be inaccessible to many investors and give them an easy way to invest in gold and balance your portfolio. This is an opportunity that should not be overlooked and it is often the best way to directly invest into gold.

If you’re considering investing in a Gold IRA, be sure to do your research and work with a reputable custodian. Having a reliable and trustworthy advocate is always important whenever dealing with anything around the field of investing and even more so with gold.

Why should you suffer a twisted stomach and endless anxiety every time bad economic news comes on the TV at night or an unavoidable Internet feed? By investing in a good Gold IRA with a trustworthy custodian you can rest easy knowing you have your built-in hedge against inflation and down times.

About the Author

Mitt Wilson has a background in journalism and has been writing about investing for more than two decades. In his free time he enjoys spending time with his wife and three children.

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