We are all bracing ourselves for that day that will inevitably come- our retirement. It is the very day that we are all preparing for- investment portfolio in hand. We put our eggs in many different baskets: mutual funds, stocks, bonds, etc. I dare you to imagine this- turning your retirement money into gold. Yes, actual Gold IRA’s.


What is a Gold IRA? 

Created by the US Congress in 1997, a Gold IRA or Gold Individual Retirement Account is a type of IRA that lets you invest in an actual precious metal, be it gold, platinum, silver or palladium instead of paper- based assets such as stocks or bonds.


You may wonder, so can any sort of gold nugget or bar be used for this purpose? The answer to this is a big NO. The gold that is used for these IRA accounts are not just your run of the mill gold bars. To qualify as gold that can be held in an IRA, certain criteria are required. The precious metal coins or bars must meet IRS fineness standards and must be held by the IRA trustee instead of the IRA owner. The gold must be stored in an IRS-approved depository. Investors don’t stash gold bars or bullion in their home safes or closets.  All other rules about IRA contributions, disbursements and taxes apply.


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This sounds all too fancy but is it worth your hard-earned retirement money?
Is it the right move for you?

Gold IRAs are for investors who want a diverse investment/ retirement portfolio.
Other IRAs invested in stocks or mutual funds are prone to inflation.
Gold prices move in the opposite direction of paper assets, adding a gold IRA to a retirement portfolio provides an insurance policy against inflation. This balanced approach smoothens out risk, especially over the long term, which makes it a smart choice for retirement investments like Precious Metal IRAs.
 
If the price of gold does dip, this likely means your paper assets will be doing well. So if your portfolio is balanced with both gold and paper-based funds, a loss on the gold side will be balanced by the gain experienced by other IRAs and investments.


What are the risks involved?

One risk is the process of investing in Gold IRA. There was a time when there was little demand for gold IRAs because they involve a very tedious and complex transaction that only the most tenacious investor was willing to do. You must find a trustee or custodian for the IRA along with an approved depository. Then, you need to buy the approved gold or other precious metal and have it transferred to the depository in a way the custodian can account for it.


Since the financial crisis of 2008 and the Great Recession that followed, gold IRAs have become a lot more popular. Record gold sales combined with the appearance of many more companies that simplify the transaction have made investing in a gold IRA a one-stop shop.  This resulted in skyrocketing gold IRA growth.


There are also some risks when investing in physical gold. Any physical investment is subject to theft. Someone could break into the depository where your gold is being stored and steal it. However, to qualify for gold IRAs, depositories are required to be insured, which would protect your investment as long as your account doesn’t exceed the custodian’s stated value.


There are also untrustworthy custodians who might steal from their customer’s accounts or commit fraud by selling you precious metals that they do not have nor are planning to buy. Choosing a custodian that will insure the financial transaction can mitigate these risks.


The bottom line:

Gold IRAs are normally defined as “alternative investments,” which means they are not traded on a public exchange and require special expertise to value. While gold has the potential of a high return, it’s easy to be blinded by its glitter. Gold can be volatile. Whichever IRA we choose, we must always be aware and knowledgeable of it’s ups and downs, the ins and outs. We, after all, want the same thing- to go to that European dream cruise or buy that car that we have always dreamed of since we were 25, sitting behind our office desk, pushing papers.  A dream retirement backed by a solid investment portfolio can be achieved by sheer determination, precise decision-making and pure knowledge.
 







 

 

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