A Gold IRA Can Provide a Safe Haven For Your Retirement Income In Times of Economic Unrest
Smart investors are looking for the best gold IRA companies and diversifying their portfolios into precious metals like gold and silver. Should you be doing the same?
Should You Consider Investing In Precious Metals?
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If You Have Substantial Retirement Assets, Owning Gold or Other Metals Provides a Sound Strategy To Preserve Your Wealth During a Severe Downturn or Economic Emergency
Egon von Greyerz has a swiss banking background and is a world-reknowned wealth preservation expert and author at DailyReckoning. He makes frequent appearances on BBC, King World News, CNBC and other financial new sources.
Governments are bankrupt…debts are increasing now…and there is no chance whatsoever to reduce the debts.
Watch Greyerz’s astonishing views in this short video:
If you’re like us, this kind of news is not only troubling by itself, but it’s enough to make you start to worry about the future over the next few years.
Add to this mix the stress and anxiety of planning for a ‘bulletproof’ future retirement, and you have a recipe for some pretty sleepless nights!
Yes, it’s true:
Some investors and experts don’t like gold as an investment — but others have long recommended diversifying your portfolio with precious metals.
Some obvious benefits if you diversify your portfolio:
- Guard your wealth against market volatility (ex. Black Monday; 2008 crash)
- Safeguard retirement funds and smooth out risks
- Transfer Money to your children or grand children
- Provide a tangible storage of monies during extreme financial emergencies
- Free your holdings from the trap of government fiat currencies
You still might be wondering:
Is owning a self-directed IRA as part of your investment strategy a good fit for all investors? Maybe not…
But for the investor that understands the benefits, it provides a unique method of expanding and protecting your resources in highly creative ways.
Wealth Preservation – Have You Protected the Assets that Your Family is Counting on if Events Turn for the Worse?
You have probably spent sleepless nights mulling over the decision to transfer or rollover your IRA into gold – and you may also be wondering whether you’re making a sound financial decision.
Take heart – some of the world’s savviest investors have positions if gold. If you follow suit, you’ll be in really good company.
Here’s an obvious task you must take care of:
Once you’ve decided to hedge your retirement funds with gold or other precious metals, how do you find the best gold company to work with?
What’s your strategy?
- Go to Forbes.com and click on website ads
- Ask your best friend what they do
- No strategy – just ‘wing it’
- Pay for the services of a professional financial advisor
Actually, all of these methods could work ( especially that last idea… ).
There’s certainly nothing wrong with making up your own mind, and it fits well with the “rugged individualist” mindset many of us have. After all, a valuable commodity like your retirement income can be just too precious, and too hard-won, to squander on someone else’s opinion….
Agreed – but here’s one thing to think about:
Using third-party “trust sites” and consumer protection ratings really can help you to evaluate your own choice.
Because this is such an important decision, investigating the success (or failures) of other people that have already gone down this path is a great beginning.
So do your ‘due diligence’ and carefully investigate the vendors in this market space – that way you’ll be gaining both reassurance and valuable insight into the companies you want to vet.
For starters, look for “trust seals” like the ones below from established consumer protection sites, or industry professionals whose names and reputations you trust.
You can also see key ratings from these same watch dog groups in our chart below.
So, what’s the next step?
The Easy Two-Step Process to Get All Your Questions Answered
- First, evaluate the consumer protection ratings below, then start contacting some of these companies. Contact more than one for comparison’s sake.
- Visit their websites; Call and talk to their financial advisors; Get a feel for who you really want to work with. (To find the best partner, don’t skip this step.)
Consumer Protection Ratings
Live Gold Price
Price chart courtesy: GoldBroker.com
Investors considering precious metals often have the following questions:
- Why should I invest in gold in the first place?
- What is a precious metals IRA and how does it differ from a regular IRA?
- What are the advantages of using IRAs over other methods of investing in gold?
- Is a Gold IRA suitable for me?
- Can I fund my Gold IRA using a 401(k) rollover?
- What should I be looking for in a gold investment company?
Why should I invest in gold in the first place?
Intelligent investors are investing in gold for 3 main reasons:
Gold provides a safe haven and hedging component to a portfolio
The value of gold has been recognized for millennia, and it holds true to this day. With the United States money supply on a constantly increasing trend, which is normal under a fiat currency system, the dollar is at constant risk for devaluation. Inflation is a fact of life, and in today’s economic climate, people are no longer surprised if bonds default or the value of stocks go to near zero.
Gold will always hold its value, and is a well-known hedge against inflation as well.
Gold is a powerful mechanism of obtaining portfolio diversification
A diversified portfolio’s overall risk is less than the sum of its parts; this is achieved through investments that are lowly correlated with each other. The correlation of gold with stock and bond prices has a historical range that is negative (particularly during recessions), to low positive, and usually stays lower than 40%.
Gold has demonstrated good historical returns on a long-term basis
In the last five years, the pice of gold has been somewhat volatile, and has even been on a downward trend at times. But don’t fret too much – over the longer haul of a (10 year) basis, average returns have been at 5.71% (as at Dec 2015). This number is far above 10-year US Treasury yields, for example.
What is a precious metals IRA and how does it differ from a regular IRA?
A Gold IRA or Gold Backed IRA is a general term used to describe a self-directed IRA that is invested in metals. The term ‘self-directed’ means that the account owner is responsible makes all decisions related to investments in the account. This type of IRA is also a ‘precious metals IRA’; under IRS regulations, self-directed IRAs are allowed to invest in 4 types of precious metals, namely gold, silver, platinum, and palladium.
Both have traditional (tax-deductible contributions for the year while withdrawals during retirement have ordinary income tax rates applied) and Roth options (contributions are not tax-deductible but withdrawals typically are free from tax).
What are the advantages of using IRAs over other methods of investing in gold?
The four common methods an investor can use to add gold to his or her portfolio are:
1. Gold Coins and Bullion
The direct purchase and ownership of physical gold coins and bullion. An investor may buy the gold directly from a dealer and store it in a safety deposit box with a broker, or via a Gold IRA. As IRS regulations stipulate that the IRA owner cannot physically have the gold in his or her possession, a Gold IRA custodian will be responsible for storage.
2. Gold Exchange Traded Funds (“ETFs”)
The ETF owns the gold while the investor purchases shares in the fund, which trade according to gold’s market price. Typically, ten shares would be equivalent to one ounce of gold. The shares can be purchased from the ETF directly or invested in through a normal IRA.
3. Gold Exchange Traded Notes (“ETNs”)
ETNs are debt instruments that track a benchmark such as gold price, with the yield being equivalent to investing in gold as a commodity. As no gold is physically owned by any party, investors take on the direct risk of the ETN issuer, which would have its issuances classified as unsecured debt obligations on its balance sheet.
4. Gold Miner Stocks
The most indirect method. It is very important to carry out specific due diligence on each gold miner company, evaluating their individual profiles such as mining reserves, production levels, and operating costs. Gold miner stocks typically exhibit higher volatility compared to gold itself; this is because the market considers gold miner stocks as a leveraged method of investing in gold.
In our opinion, Gold IRA investing is the most advantageous method, especially for these 2 reasons:
Ownership of High Grade Physical Gold
Simply put, direct ownership of gold allows the investor to reap the most benefits out of gold investments. IRS regulations also strictly cover the quality of gold that can be bought using a precious metals IRA, ensuring only 99.5% (24 karat) minimum quality; this does not apply to the other methods.
There is no guarantee on quality of gold held under ETFs and investors may face stock redemption issues. ETNs have no principal protection as there is no actual gold involved, while gold miner stocks have the highest volatility risk and require the most research and specialized knowledge to invest successfully.
Highest Returns Post-Tax
The IRS classifies precious metals as collectibles and gains on such investments held for under a year will be taxed as ordinary income, similar to short-term capital gains. If held over a year the maximum collectibles tax rate of 28% is applicable even though such gains will be taxed as ordinary income.
By way of comparison, the long-term capital gains rates vary from 15 – 20%. If invested through a metals-based IRA, the marginal tax rate of the individual investor is applied, instead of the maximum collectibles tax rate of 28%. This case study from the Journal of Accountancy shows that annualized after-tax returns are highest when using Gold IRA companies to invest in gold.
Is a Gold IRA suitable for me?
Only you, as a unique individual, can make that decision.
One notion that we would like to dispel, however, is that gold is an investment only for sophisticated investors. Anyone can invest in gold, and Gold IRAs have made the process simpler than ever. Nevertheless, appropriate due diligence should be carried out prior to making any investment decisions, with a careful consideration of the benefits and risks involved. It is important that you are also aware of the risks involved such as:
Market Volatility Risk
The price of gold is still subject to market forces, and they have been significantly volatile, with speculative forces being pinpointed by analysts as the source of much of this volatility. This means that gold may not be the best for short-term investors, although historical data has shown more than adequate long-term returns on investment. Analysts are speculating that gold may be fast approaching peak production, which bodes well for long-term gold price prospects.
Risk of Theft or Fraud
As IRA owners cannot physically have the gold in their possession, they would have to go through a broker and a custodian, exposing them to risk of fraud or theft. Fortunately, this risk is easily managed by ensuring that an appropriate and trustworthy gold investment company is chosen.
IRS regulatory decisions can often seem highly arbitrary and vague, and sometimes appear to be made without the taxpayer in mind. Hence there is always a risk that the IRS may change its regulations pertaining to Gold IRAs. While we cannot do anything about it, many believe this risk as minimal and it would be silly to not consider investing with Gold IRA companies for this reason alone.
Can I fund my Gold IRA using a 401(k) rollover?
Absolutely. In fact, as gold is best as a long-term investment, it is common for people to fund their IRAs with their various retirement plans such as 401(k)s, Thrift Savings Plans, and other IRAs. The 401(k) to Gold IRA rollover process is very simple and funds can be transferred directly from your 401(k) or any other retirement plan.
What should I be looking for in a gold investment company?
We look at 4 main factors when assessing gold investment companies:
1. Track Record and Reputation
Choosing a company with an excellent track record and reputation is paramount.
The highest ratings possible are A+ for the Better Business Bureau and 5-star ratings for the last two. Individual customer reviews are also available on each site. Using these impartial sources to guide your judgement is probably a great way to choose a solid gold broker or custodian. Don’t let hidden fees lower your returns; make sure any company states all its fees upfront. Standard annual charges in the industry are $250 for storage and administration. It’s also best to avoid percentage based fees, as these could be disastrously high for those with larger investment amounts. A good custodian stores their customers’ gold in a licensed and secured depository such as the Delaware Depository, the largest depository in the United States outside of New York. The Delaware Depository is also a licensed depository of the CME Group as well as the ICE Futures US, and backed by a billion dollar all-in insurance coverage policy. Easy to buy, hard to sell; don’t let it happen to you. Paper returns are worthless unless they are able to be realized. Investors should be assured that they would be able to quickly and easily liquidate their gold holdings at prevailing market prices. The best buyback policy? A company that commits to buying back their clients’ gold at the highest spot price of a particular trading day, with no additional fees. If you are serious about adding gold to your portfolio, we invite you to take a look around this site; we have many detailed articles, guides, and resources to help you make an informed choice for your own financial goals and needs.
2. Upfront and Reasonable Fees
3. Gold Storage Safety
4. Generous Buyback Policies
More and more investors are investing in gold to protect and safeguard their wealth and lower their overall risk – are you doing the same?
The highest ratings possible are A+ for the Better Business Bureau and 5-star ratings for the last two.
Individual customer reviews are also available on each site. Using these impartial sources to guide your judgement is probably a great way to choose a solid gold broker or custodian.
Don’t let hidden fees lower your returns; make sure any company states all its fees upfront. Standard annual charges in the industry are $250 for storage and administration. It’s also best to avoid percentage based fees, as these could be disastrously high for those with larger investment amounts.
A good custodian stores their customers’ gold in a licensed and secured depository such as the Delaware Depository, the largest depository in the United States outside of New York. The Delaware Depository is also a licensed depository of the CME Group as well as the ICE Futures US, and backed by a billion dollar all-in insurance coverage policy.
Easy to buy, hard to sell; don’t let it happen to you.
Paper returns are worthless unless they are able to be realized. Investors should be assured that they would be able to quickly and easily liquidate their gold holdings at prevailing market prices.
The best buyback policy?
A company that commits to buying back their clients’ gold at the highest spot price of a particular trading day, with no additional fees.
If you are serious about adding gold to your portfolio, we invite you to take a look around this site; we have many detailed articles, guides, and resources to help you make an informed choice for your own financial goals and needs.