There are many different types of IRA, and most people will have more than one investment so that they have some diversity in their portfolio. This helps to ensure that if there are massive changes in the markets, at least a part of their investment is likely to have still gained in value. The beauty of taking out an IRA is that you can enjoy some tax benefits from it.
The best way to have a physical gold IRA explained is to think of it as an investment where you are buying a physical commodity, and having it held somewhere for you, safely, by a custodian.
Gold is an appealing investment because it is an uncorrelated asset. When economic growth slows down, almost all investments will lose value. A stock market crash could see you lose almost 50% of your savings. Gold tends to be more stable than other investments, and while it is less likely to explode in value than other investments, it is also less likely to lose a huge amount of value.
Gold IRAs are similar to conventional IRAs, however, instead of investing in stocks bonds, mutual funds or ETFs, you are investing in physical precious metals. Self-directed IRAs give you the option of investing in a number of tangible assets. There are more rules for self-directed metals than there are for other kinds of IRA, but these rules exist to protect people.
Tax Savings for IRAs
Gold IRAs are tax-advantaged, just like other IRAs. If you choose a traditional IRA, then you can make tax-deductible contributions now, and enjoy tax-free growth until you reach the age of retirement. You will then be taxed when you start withdrawing the funds. With a Roth IRA, you will not get a tax deduction when you put the money into the account, but you won’t have to pay tax when you reach retirement age.
Physical Gold Vs ETFs
Before you invest in a gold IRA, It is important that you understand the difference between physical gold and gold ETFs. An Exchange Traded Fund is a proxy for gold, which is traded in a similar way to stocks. Most funds are backed with something like large gold bars, and you don’t actually own the gold that you are trading ” you can’t say “please send me the bullion”, because you’re buying a portion of a large bar. ETFs are cheap, convenient, and offer extra liquidity.
This means that they’re more volatile, and you’re exposed to counterparty risks that you wouldn’t face with physical gold. The value of your investment will increase or decrease in line with bullion, roughly, but you’re still exposed to some of the risks associated with trading stocks, bonds, etc.
When you invest in a gold IRA, you are trading real, physical gold. This has some downsides because the process of buying the bullion and having a custodian take care of it is more longwinded, but it is a more stable form of investment and stable is what most people are looking for when it comes to retirement funds.