How To Buy Gold in an IRA to Preserve & Grow Wealth for Retirement
Are you trying to learn how to buy gold in an IRA to preserve & grow wealth for retirement? Adding diversity to your portfolio is an important fact of life and it will significantly improve your wealth creation, preservation, and growth for your retirement future.
Opening a gold IRA and adding precious metals like gold, silver, platinum, and palladium is a great way to add diversity and massive potential for growth. This effective strategy is excellent for a few reasons, but in particular, we like it because:
- It’s an excellent way to hedge your bets against inflation
- It’s a great way to hedge your bets against market volatility
- It’s a wonderful opportunity that offers real-world potential growth over time
Why is investing in gold so valuable? For starters, it’s a safe haven asset. When economic uncertainty began to crush the markets, investors liked to stick with tried-and-true methods, including storing their wealth in gold.
Example: During the crash of the housing and financial markets in 2008, too many investors lost way too much money because they were heavily invested in stocks, bonds, and treasury bills. Intelligent investors noticed the signs on the wall and began investing in physical gold. Before long, the value of gold shot up from roughly $700 an ounce to nearly $2000 an ounce a few years later.
Before tackling the gold market, you’ll need to understand the right way to buy gold in an IRA, which is certainly of the utmost importance. You’ll also need to know certain rules and requirements that dictate this market. Plus, you’ll have to learn the best method to open a self-directed IRA, which we will fill you in throughout this article.
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The Most Important Reasons to Buy Gold in an IRA
You know it and I know it. The financial markets can’t crumble the pieces in no time flat. They did it in 2008 and they fell apart again in 2020 during the pandemic. Having extra protection to preserve your wealth certainly doesn’t hurt. The most important reasons to buy gold in an IRA include:
- Hedge against Inflation – this isn’t the only reason to open a gold IRA but it’s certainly my favorite. Over time, inflation has the ability to destroy your purchasing power. Historically, when compared to the US dollar, the value of gold tends to remain stable because it’s a true store of value. Keeping physical gold in an IRA as protection for your retirement savings minimizes the damage caused by inflation.
- Diversification – it’s risky to keep all of your eggs in one basket, as we’ve all learned. Spreading your risk is the best way to stop being over-exposed to the financial markets. When compared to stocks and bonds, gold and other precious metals have a low correlation. It performs differently, which is why it’s such an important added measure of protection. Open a physical gold IRA to become less dependent on a single asset class and reduce risk to your overall retirement portfolio.
- Long-Term Growth Potential – investing in physical gold in an IRA is much more than making a defensive move to preserve your wealth. The potential for long-term growth is tremendous within this asset class. Not only is it a long-term store of value, but the growth potential is stupendous. In fact, on average, the value of gold has increased by 10% per year since 1972. Past performance does it guarantee future results, but historically gold is resilient and it can thrive in the worst market conditions.
Precious Metals Investments: The Best Types for a Gold Self-Directed IRA
While thinking about adding gold, silver, and other precious metals to your retirement portfolio, it’s important to better understand all of your options. We’ll look closer at the common investment types including physical gold, silver, platinum, and palladium.
For those looking for true diversity in their portfolio, buying gold is the right choice because it’s the most popular investment. It’s also the one that can retain and grow your wealth the best. The most popular options are as follows:
- Gold Bars – these bars are available across various weights including 1-ounce, 10-ounce, and 1 kg bars.
- Gold Coins – the best, most highly respected options include government-issued coins. Our favorite options include the South African Krugerrand, Canadian Gold Maple Leaf, Austrian Philharmonic, and the American Gold Eagle to name a few.
Keep certain factors like premium over spot price, weight, and purity in mind when purchasing from a gold IRA company.
Investors love adding silver to their portfolios because it’s an excellent hedge against inflation and it’s also a great investment that can grow your wealth. Like gold, the top types of silver include coins, rounds, and bars. Consider these popular options:
- Silver Bars – choose from various weights including 1-ounce, 10 ounces, and 100 ounces.
- Silver Coins – government-issued coins are always a great choice. Top options include the Silver Australian kangaroo, Silver Canadian Maple Leaf, and silver American Eagle.
Although platinum isn’t as common for investors to purchase when compared to gold and silver, it’s still a great option for portfolio diversity, growth, and wealth preservation. There are excellent premium coins and bars to consider. They include:
- Platinum Bars – platinum bars come in various weights and sizes including 1-ounce bars and 10-ounce bars.
- Platinum Coins – government-issued coins are the best and are usually required because they meet certain purity level requirements. Platinum Canadian Maple Leaf coins and platinum American Eagle coins are great choices.
Palladium is a precious metal that is also acceptable to purchase in a gold IRA to add diversification to your portfolio. The best bars and coins to choose from include the following:
- Palladium Bars – offered in various weights including 1-ounce bars and 10-ounce bars.
- Palladium Coins – there aren’t many Palladium coins available to purchase that meet government approval. Top choices include the Palladium Russian Ballerina and the Palladium Canadian Maple Leaf coin.
Note: Platinum and palladium aren’t as common as gold and silver, which means the same level of liquidity doesn’t exist. Keep this in mind while making your future retirement investments.
Gold IRA Setup Process: Step-By-Step Instructions
Setting up this account correctly is far from impossible. In fact, your online gold company will provide excellent recommendations to help you get started on the right foot.
The step-by-step instructions include:
Step #1: Choosing the Right Self-Directed IRA Custodian
Finding and eliciting the services of a reputable self-directed IRA custodian is paramount when just starting out. The company you choose must have a great reputation because they’ll manage your gold IRA, which ensures you remain compliant with the rules provided by the IRS and keep your gold safe and secure in an insured depository.
Picking the right custodian doesn’t need to become a major hassle. Consider the following factors while making your choice:
- Reputation & Experience – funny custodian with an excellent reputation and a proven track record within the precious metals IRA industry. Check with the Better Business Bureau, the Business Consumer Alliance, and read online reviews to learn about their ratings and possible complaints or wonderful testimonials.
- Expenses & Fees – compare the fee structure of the custodian with other expenses and fees. Remember, each company has their own fee structure, so keep this in mind. Some offer flat fees for account maintenance and storage, while others charge based on a sliding-scale.
Step #2: Add Funds to Your New IRA Account
As we continue the journey to learn how to buy gold in an IRA to preserve & grow wealth for retirement, the next step is to fund your new IRA account.
After you’ve picked the best custodian based on your personal criteria, funding the account is the next logical step. You can do so in the following ways:
- Contribution – each year, IRA account holders are allowed to make their annual contribution based on the specific limits created by the IRS. Right now, the annual contribution is $6000 per year if you are 49 years of age or younger. It’s $7000 per year if you are 50 years of age or older.
- IRA Rollover – do you have an existing qualified retirement account like a 401(k) or 403(b) or another qualified account from your former employer? It’s possible to roll over these funds into your gold IRA. If you complete the rollover within the 60-day allotted time frame, you will not pay early withdrawal penalties or distribution taxes.
- Transfer – do you already have an IRA account? You can transfer funds from this account into your gold IRA without facing any tax consequences.
Step #3: Picking the Right Gold Investments to Get Started
You’ve chosen a gold company, you’ve picked your IRA custodian, and you fund your account. It’s time to finally begin investing in gold. Find the gold options to meet your needs and make sure to select those with IRS approval. The best places to get started include:
- Gold American Eagle coins
- Gold Canadian Maple Leaf coins
- Gold Austrian Philharmonic coins
- Gold Australian Kangaroo coins
- Gold rounds and bars from IRS-approved mints from around the world
Warning: buying collectible gold coins isn’t possible for a gold IRA because they are considered rare coins and they do not qualify. Talk to your IRA custodian to make sure your investment choices meet any and all IRS requirements.
Tax Consequences and Withdrawals
In this section, we will dissect tax-free growth, mandatory distributions, and early-withdrawal penalties.
- Tax-Free Growth – this is a significant advantage of buying gold and purchasing it within a precious metals IRA. Your gains are tax-deferred in this account or completely tax-free, depending on how it’s set up. Tax-free growth gives you the potential to maximize your retirement funds to live comfortably in the future.
- Mandatory Distributions – at age 72, the IRS requires mandatory withdrawals and distributions. This has tax implications because it gets treated as taxable income.
- Early-Withdrawal Penalties – if you were to withdraw money from this account before reaching 59 ½ years old, you’ll pay a 10% penalty on top of the tax consequences that are considered ordinary income. Early withdrawals are allowed in some situations that include: up to $10,000 for first-time home purchases, expenses related to higher education, unreimbursed medical expenses exceeding 7.5% of your adjusted gross income, and premiums for health insurance while you are unemployed.
Monitoring & Rebalancing Your Account
Keeping your growth strong and your account healthy requires periodic monitoring and rebalancing, which is critical to your portfolio. The best things to do include:
Periodic Performance Review
Every quarter or every six months, you should look at your portfolio to see how it’s doing. How are your investments performing? Should you make any adjustments? Consider:
- Compare your IRA with other market benchmarks. Is it measuring up to the spot price of gold? How about other precious metals?
- Analyze gold price fluctuations. Follow economic indicators that might have an impact on gold’s demand including global events and inflation.
- Review IRA fees including transaction fees, management fees, and storage fees.
Adjust Your Gold IRA Portfolio When Needed
Did you complete your IRA performance review? Have you recognized the need for further adjustments? Make adjustments to maintain your level of risk and consider the following portfolio tips:
- Add More Diversity – is your gold IRA heavily weighted with gold? Would you benefit from adding silver to the mix? How about more platinum or palladium? Should you add more bars or coins?
- Rebalancing – have your gold investments grown significantly over the years? Selling some of your assets to rebalance your portfolio might be a good idea. You can reinvest this money and other favorable asset classes.
- Get advice from a professional. If monitoring and rebalancing your portfolio seem too far out of your comfort zone, you could always seek professional advice. Contact your gold IRA specialist and ask them to help you create a tailored strategy to meet your goals and needs.
Right now, you undoubtedly know how to buy gold in an IRA to preserve & grow wealth for retirement. We laid it out very clearly for you to understand and experience the many benefits of owning this precious metal and others like it.
Always pay close attention to the IRS’s rules and guidelines and remember to remain compliant. Choose a trusted IRA custodian, pick high-quality bullion investments, and remember to remain patient and diligent. You can sleep comfortably at night knowing that you’ve safeguarded your wealth with this proactive approach.