Is a Gold Backed IRA for You?

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It doesn’t matter who you are, if you are not currently a multi-millionaire and don’t plan on becoming one in the future, getting an IRA (individual retirement account) is an exceptional idea to get yourself properly prepared for retirement. Why are IRAs so great? It is because they typically offer an easy way for people to grow their retirement funds over the course of their careers. In addition, the tax advantages that come with IRAs make this type of saving even more beneficial. There are various types of IRAs out there to choose from, and they are defined by which assets you use for investing. One specific kind is called a gold backed IRA, and rather than being valued based on assets like stocks, mutual funds and bonds, these IRAs are valued based on gold. Depending on your situation, converting to this type of IRA might or might not be the best thing for you. Read on to learn about some gold backed IRA information.

Gold backed IRA

What a Gold Backed IRA Is

This type of IRA is a type of precious metals IRA. These have been around for years, and according to the federal regulations in place, you have the option of funding your IRA with precious metals rather than U.S. dollars. The rule is that the metals must come from a specific list that has been approved by the federal government. As you may have guessed, gold is included on the list, along with other metals like silver and platinum.

Now, there are some reasons why a gold backed IRA will differ from other types. For one, this kind of IRA is self-directed, meaning you are the account holder; therefore you make the decisions. Another difference can be seen in the way you maintain assets. For instance, stocks exist digitally, whereas gold does not. This means you will have to keep actual gold and you must arrange for storage for it as well through an investment firm. This investment firm is called a trustee or custodian. Because of this, there will be a fee that you must pay the custodian which will probably be around $100 to $200 yearly.

With a gold backed IRA, you must additionally buy specific types of metals. For instance, the gold you purchase has to be in 24-karat gold bullion bars weighing anywhere from one ounce to 400 ounces. Now, both foreign and American gold coins are accepted as well. It is also important to note that the factors that have an influence on gold’s value are quite different from those that influence the value of stocks. These factors are basically opposites, and typically when the stocks go down, gold goes up and vice-versa. Consequently, on both the U.S. dollar and the stocks, gold is a hedge. Companies like Regal Assets offer gold backed IRAs, so if you are interested you may want to check them out.

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Why Should You Invest in Gold?

If you are now considering getting a gold backed IRA, you may be curious as to why you should invest in gold. As mentioned above, gold is a hedge against falling stock market value and the U.S. dollar. Because of this aspect, when people start to panic or become uncertain about things like stocks, they turn to gold simply because it is a safe store of value. The value of gold does not change. Price changes are merely an adjustment that reflects the current dollar value, but not the value of the gold. Therefore, gold will always be in demand by people, even when they get turned off to having stocks that have the ability to lose value in an instant or dollars that are likely to be subject to inflation. In other words, gold is a sound investment as compared to other things.

Here are some examples of the changing gold prices. With the recessions that occurred in 2000-2001 and 2007-2010, the price of gold skyrocketed. During some of those years, the stock market did lose over half its value. Gold prices went from roughly $300 to almost $2,000 in 2011. The price has fallen since, and gold still has the ability to guard against inflation.

Determining if a Gold Backed IRA Is the Thing for You

There are some reasons why a person would choose to have a gold backed IRA. Some of these reasons include if you are interested in maintaining your money’s store value, keeping inflation under control and potentially benefiting from a gold upside in the future. In addition, this type of IRA is not any more complicated or complex than the other types of IRAs out there. They also involve much less decision making than other kinds. For example, an IRA that would require more decision making would be one with a stock portfolio that needs constant monitoring and balancing.

A gold backed IRA can come with some downsides, too that you should know about if you are considering getting one. The potential for growth of this type of IRA is not as high as a stock-based one. This is due to the idea that it is difficult to predict what will happen to the price of gold over the next 10 to 30 year period, which is possibly how long you will have your IRA. Gold typically tends to stay around the same price, but things like recessions could change that. In addition, if you choose to go all gold, you are not allowing for much diversity that could come with other methods like mutual funds and bonds. However, you could decide to include a certain amount of gold in the IRA if you want that protection against inflation.

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Despite the downsides, gold backed IRAs are still beneficial and have many advantages. Consider your specific needs when determining if one would be right for you. Also, think about how one may be a more stable investment when compared to stock-based IRAs. Check out Regal Investments if you want to learn more about this type of account and if you are searching for the best gold backed IRA.

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