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A retirement portfolio consists of every account that generates income during the retirement years. This might also include assets like stocks, bonds and gold. Individual retirement accounts, or IRAs, present a method for workers to save for the years of retirement beyond whatever’s available in a pension or Social Security retirement account.
There is a tax advantage to be gained from using a retirement account instead of simply keeping cash in a physical location at home, for example. Retirement annuities and accounts with a custodian enable the retiree to benefit from these tax perks while building a robust plan for funding the retirement years. In addition, the money inside of these accounts can build additional value through their use in long-term investments.
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Overview of Gold IRA, Value of Gold
The Gold IRA is a particular kind of account; it’s called a precious metals account.
Gold tends to become most attractive as a retirement investment during a stock market crash. Economic downturns can be catastrophic for people who keep their investments in only certain kinds of assets.
In some cases, people can lose their entire retirement savings when the crash wipes out the value of stocks and bonds, for example. Building a robust retirement portfolio is called diversification. This enables the retirement funds to withstand the ups and downs of the market, and gold is an asset that’s demonstrated robust performance under all market conditions.
History of Gold's Value
There is a long history of gold being used as a means of storing value. This precious metal has been used as a currency medium to promote trade during times when other options were unavailable. Over more than 5,000 years, it has performed in a steady manner that resists inflation and various currency crises.
Gold has proven to maintain its value during various market conditions; this increases its attraction as an investment. Retirement planners often promote stocks and bonds as two reliable assets that can fund the retirement years of life. However, stocks and bonds are very similar to each other; gold offers diversity, which builds a more robust retirement portfolio.
Tracking the history of gold’s value is difficult, but it can be helpful to review specific moments to assess what’s happened to the value of gold over time. For example, during a 100-year period of time, the value of a piece of gold appraised at $20 rose to around $1,100. This represents an appreciation of value that is only passed in significance by its relative stability in terms of purchasing power.
Stocks and Bonds, Gold IRA Comparison
Compared to stocks and bonds, the performance of gold is much more stable and reliable. Historical records demonstrate that stocks and bonds can lose as much as 60 percent of their value during a major crash or economic downturn. The value of gold is maintained during these periods on account of the tangible nature of this commodity.
Basically, if the stock market crashes, gold tends to maintain its value. People who look to gold to provide the necessary value for funding retirement years must also understand how to invest in a Gold IRA account. There are specific rules about how individuals are allowed to buy gold for the purpose of building a retirement account.
IRS Regulation of Gold IRAs
The option for enrolling in a Gold IRA account began when Congress authorized this as a financial option around 1998. At that time, the cost for enrollment was higher than the standard IRA account. The stabilization and increase in use of the precious metal IRA reduced the cost of participation over time; however, some associated costs still apply.
There are companies that can help you to understand and navigate the specific rules that the IRS has for precious metals and IRA accounts. The most important issues involve the purity of the metals and the storage of these items in a physical location. To get the tax benefits, you will need to ensure that compliance is maintained while directing purchases with your custodian or setting up a legal LLC.
Pros and Cons of Gold IRA
Options and Exceptions
Storing gold at home is technically allowed as long as the gold isn’t part of an IRA account, which is regulated by specific taxation laws. This includes gold coins, bullion, bars and other physical items made of gold. These items are all classified as collectibles by the IRS, and the IRA statutes are designed to make them ineligible for holding in the IRA account.
Avoid claiming gold as part of an IRA account in order to avoid the associated penalties. If you elect to use any form of storing gold at home or elsewhere, just be aware that you won’t be able to enjoy any tax benefits legally for choosing this method. Some exceptions to these rules do exist, but this is a tricky legal area, and you might want to check with your custodian to see if they apply.
Consultation for Gold IRAs
Banks or trustees will generally hold specific types of bullion in their physical location. The insurance costs for the Gold IRA is an offset cost to the risks faced by those who invest in physical precious metals. If there is any confusion about these rules, the best course of action is to locate a trusted and reputable advisor.
You should explore all of the options available to you including the Gold IRA. For example, you might be interested to learn more about the option of investing in gold funds or stocks as an alternative. This information is available in order to enable you to make informed decisions.
When it comes to your retirement plans, it’s worth taking the time necessary to learn directly from experts on gold accounts, retirement planning and portfolio diversification. Only certain assets are eligible for holding in the standard or traditional IRA. Trading is another viable option for building a robust retirement account using gold.
This option is more likely to apply if the drawbacks of the Gold IRA outweigh the benefits, for example. Having a backup plan is a good idea when researching the pros and cons of the Gold IRA itself. This will allow you to see the big picture while gaining insight into the various benefits and potential risks of opening a Gold IRA account.
Navigating Regulatory Changes
Consultants are also valuable when the rules for gold get changed, and this does happen periodically. For example, when Congress first modified the rules for investing in gold to include bullion based on the weight instead of the value as a collectible, a purity test of 99.5 percent was imposed. This measurement is important when determining if the gold qualifies to be included in the IRA.
Currently, the body of law that determines the rules for gold can be found under IRC Section 401(a). If you read this section and still have questions about your situation, this might be the right time to begin searching for a reputable consultant. Reliable information has its own value when making critical decisions about how to fund your retirement account and diversify your portfolio.
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