Is a Precious Metals IRA Safe?
Are You Worried About Depleting Dollar Purchasing Power and Economic Uncertainty? A Precious Metals IRA May Provide Protection – but is It Secure?
An Individual Retirement Account (IRA) for Precious Metals allows you to invest in physical gold, silver and palladium approved by the IRS. This video covers everything you need to know about setting up such an IRA to purchase these alternative assets.
1. Inflation Hedging
Inflation can rapidly diminish the purchasing power of cash- and paper-based assets. By investing in physical precious metals in an IRA, an inflation hedge can be provided.
Gold, silver, platinum and palladium have long been revered as reliable investments, providing protection from currency devaluation and geopolitical uncertainties. These precious metals offer tangible ownership that provides security.
Other investments may also serve as inflation hedges, including real estate which generally performs well during periods of inflation and senior secured bank loans which offer higher yields than bonds and may not suffer as greatly from rising prices as inflation does.
Another worthwhile investment option is investing in utilities, which provide a solid inflation hedge and typically have lower risks compared to many other forms of investments. Utility stocks deliver steady dividends with lower risks.
2. Diversification
Diversification is an integral component of a sound investment portfolio. Diversifying can help lower risk while increasing potential financial success during retirement. Diversifying can involve combining investments from different asset classes as well as purchasing stocks from different industries or real estate properties from multiple neighborhoods, for instance.
Physical precious metals provide tangible assets that provide security during times of geopolitical unrest or economic uncertainty, yet can lag behind stocks when markets perform poorly and storage fees and other fees can reduce return on investment.
Therefore, precious metals should only be considered a small supplement to your retirement savings portfolio. You could potentially get the same exposure by investing in exchange-traded funds or mutual funds that track precious metal indexes or prices instead.
3. Taxes
Precious metals have historically proven their worth during periods of inflation, providing an effective hedge against rising prices and helping to safeguard against their effects. Furthermore, precious metals tend to be more stable than paper assets such as cash or stocks which tend to decline in value and purchasing power over time due to inflation.
IRAs can hold physical precious metals, but it’s essential to understand their tax treatment. According to the Journal of Accountancy, withdrawals are taxed as ordinary income and may incur a 10% penalty if taken prior to reaching age 59 1/2.
Investors looking for precious metals IRAs have several options when choosing one: traditional, Roth and rollover. Either way, all precious metals must be stored by an IRS-approved custodian or depository so as to avoid taxes; alternatively it is also possible for an “in-kind withdrawal”, whereby the depository sells back the metals back directly back to you without leaving their possession at all.
4. Investing
Many investors choose precious metals investments as safe haven assets during economic turmoil. Doing so provides valuable diversification for retirement portfolios otherwise comprised of stocks, bonds and cash investments.
However, investors must remember that gold and other metals do not produce dividends or interest and thus should only form part of a retirement portfolio.
Investors seeking physical gold for their IRA should work with a reliable and regulated precious metals IRA custodian. Such firms generally manage Self-Directed IRAs, which allow you to invest in alternative assets such as precious metals, real estate or promissory notes without restricting yourself solely to stocks, bonds and mutual funds. A good custodian will purchase metals on your behalf before securely storing them with IRS regulations in mind; additionally they may help find suitable dealers offering quality IRA eligible bullion products such as American Eagle coins with quality customer service for optimal investing experience.
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