Self-directed individual retirement accounts have been around for quite a while. These weren’t always as inclusive as they became in 1997 when precious metals were introduced for holding in these IRAs.
Regulations limited the bullion that could be placed in an IRA along with the purity level for each piece of gold, silver, palladium, and platinum. Many investors turned to the self-directed IRAs with the express purpose of holding gold or other metals, with many favoring gold as the metal of choice. That stands true.
Metals might present their own risk and volatility. Still, many are of the mindset that, given gold’s history, these are superior long-term investing options. That’s not only holding their value but also with steady growth.
While some investors are still trying to figure out if a precious metal or gold IRA is a good option for a retirement strategy, practical information can be found on the Cayman Financial website. On this site, a group of seasoned investors offers educational literature detailing varied investment ventures with an extra focus on gold and gold IRAs.
When you become well informed on an asset you’re curious about adding to your holdings; the decision is relatively straightforward. Let’s look at why investors should consider gold as a viable option for adding to their portfolio holdings.
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Why Consider Adding Precious Metals to Your Portfolio Holdings
A conventional individual retirement account typically consists of paper assets like mutual funds, stocks, and bonds; however, the standard classes offer minimal assurances for wealth protection.
As was demonstrated (significantly) with the financial crises going back to 2008 and even further to 2000, retirement savings were virtually “annihilated,” with many working-class Americans seeing their nest eggs “evaporated.
Why?
Corporate America and many financial service organizations push real estate and stock investments as the ideal means for wealth accumulation. The mainstream media concurs, and the government offers tax breaks to make the process more enticing.
No one, however, mentions the risks. Nor does anyone suggest you might want to consider diversification in the instance all of these take a nosedive when the market dips since these all correlate.
Instead of accumulating wealth that can be wiped out with one financial crisis, how about finding a way to preserve that wealth. The suggestion is that since self-directed IRAs were permitted to hold gold and other metals, they became a favored choice due to their ability to remain stable in a volatile market.
In the same context as you would purchase an insurance policy to cover an asset like your house or car, a gold IRA is the sort of investment that acts like an insurance policy meant to protect your retirement savings.
When a portfolio is adequately diverse, wealth can be “immune” to the tremendous turbulence seen so often on the market, not to mention inflation hikes, the devaluation of currency, and deflation.
Why should you consider adding precious metals like gold to your retirement savings? Why wouldn’t you?
What are the Benefits of a Gold IRA
Gold has a reputation worldwide due to the thousands of years it has passed from culture to culture, retaining its worth and establishing a rich history.
The margin for error in the financial realm coinciding with economic and financial crises have “investment analysts” encouraging investors to expose their retirement plans to assets deemed “safe havens.”
That would include precious metals, more specifically gold. People continue to stand by gold century after century. Look here for guidance on what to do if you happen upon gold. Let’s learn why.
Diversification
First and foremost, gold added to a retirement strategy acts as a protection if the market goes into “shock.” Typically an investor’s portfolio is paper-heavy with stocks, bonds, and funds with the potential for some real estate. The problem with all these is they correlate with the stock market.
Gold helps to create a degree of stability in a retirement plan since it is not affected by the market. In fact, it has either held steady in times of crisis or even been known to rise in value.
No one wants to have all their holdings in one class or sector; instead, have some that will step in when others are down and out and vice versa. When taking the opportunity to invest in a precious metal IRA as a way to diversify a paper-heavy platform, there’s more of a likelihood of withstanding the subsequent financial turmoil.
Insurance Policy
There is a suggestion that holding onto a physical commodity in savings like gold or silver is reminiscent of insurance coverage on retirement wealth. Upon discovery, these metals were found to be “significant,” to say the least, and have continued to be. That has not carried true for conventional paper assets.
There is every possibility that a firm can liquidate with its stock zeroing out, leaving the stockholders with nothing. Precious metals have never seen a low of zero with no potential for falling out of business.
Paper assets held in a traditional IRA are vulnerable to hikes in inflation. In contrast, gold held in a self-directed IRA moves polar opposite to this class, making it a hedge against inflation, helping stabilize vulnerable holdings.
Investors choose gold since it’s a “store of value,” a way to protect wealth, and an added layer of stability in a portfolio otherwise deemed high-risk.
A Degree of Control
Gold IRAs are self-directed, putting the investor in control of the assets. A self-directed account can include a vast array of alternative classes, but it can also consist of conventional retirement assets like stocks, Treasury notes, and on.
A “fund custodian” cannot establish a predetermined grouping you must commit to. You are given great flexibility with the final say as to where you place your funds and what precisely you select as an investment opportunity.
You can increase your degree of risk if you so choose to live on the edge or opt to play it a bit safe. If you see yourself as protecting your wealth, allowing it to maintain and grow steadily over the long-term, physical gold or silver answers that strategy.
The Potential for Growth
Generally, when the economy sees strife, so do many individual retirement accounts. A conventional IRA relies considerably on paper assets, and these, in turn, are dependent on the economy in good times and bad.
Those same financial fluctuations create weakness among the paper assets like stocks, and the like, plus cash has the potential for heightening gold and other metals’ profits.
Time and again, the demand for gold has risen when the economy has been in crisis. The physical commodity has proven its ability to retain long-term purchasing power for extended periods with a “greater efficiency in storing wealth than cash.”
Tax Advantages
As with a conventional IRA, gold or precious metal IRAs offer the same tax advantages. The self-directed precious metal IRA also allows investors to choose the same types of IRAs as conventional IRAs like traditional or Roth.
With the traditional option, the funds contributed are tax-deductible, and with a Roth account, funds are tax-free.
These tax advantages apply for individuals waiting to take distributions until after age 59.5. Investors who decide to make early withdrawals run the risk of facing tax repercussions and the potential for penalties that can range as high as 10%.
Final Thought
All the information Cayman Financial provides on its website means to inform investors, keeping them up-to-date on all investment ventures but focusing on gold and gold IRAs. When you become informed on the assets you’re curious about adding to your retirement portfolio; the decision is made clear.
There is a relative curiosity surrounding gold and other metals in an IRA, with many wondering if these are the right choice for their specific strategy. As demonstrated here, most traditional investors have a conventional portfolio rife with standard asset classes meaning their platforms are paper-heavy.
In saying that, these also strongly correlate with the financial markets, meaning they will see heavy losses when there’s a crash.
Should you diversify with gold or other metals? Investing is seriously personal, with investors needing to seek advice from financial advisors, consultants, and services knowing the entire history and future goals.
When looking from the outside in, off the cuff, with no insight, gold should balance paper-strong holdings helping protect retirement wealth while maintaining its value with the potential for steady growth over the long-term. Always seek the advice of your personal advisor.