What is a Gold 401k
So, why should decide to invest in a gold 401k? Well, that is primarily because your retirement is on the line, which is something sacred to all working-class Americans.
There is no doubt about the fact that we are flying in highly turbulent skies when you talk about the economy today, especially after the election of the current administration.
And with volatility right around the corner, you have to understand that gold has been the only powerful hedge against economic collapse.
Furthermore, IRA accounts mainly depend on a specific, select category of bond, stocks, or mutual funds, which are without a doubt eternally emerged with the economy.
And when the economy gets hit with volatility and collapse, the value of almost all IRAs that consist of stocks, bonds, and mutual funds begin to significantly plummet as well.
However, over the last 10 years, gold has performed remarkably well, outperforming the DOW by more than 300%, which gives birth to the ultimate question – why wouldn’t you invest in a precious metal IRA like gold and silver, securing a major chunk of your retirement and protecting your accumulated savings?
Especially since both Gold and silver have high intrinsic values.
What that essentially means is you retain total control of all your investment choices and decisions with respect to your gold-backed Individual Retirement Account.
There are plenty of advantages in opting for a Self-Directed IRA; for starters, you can become more profound in accurately pinpointing your asset mix.
Not to mention you can also enjoy a greater degree of flexibility when it comes to expanding or growing your retirement savings and holdings, looking way past traditional stocks, which primarily include hedge funds, stocks, bonds as well as municipal funds.
So, rather than becoming fixed in a single asset category or group, which is selected by a fund custodian, you can alter your Self-Directed IRA to gain more personal control and autonomy over all the profits you make, the losses you suffer, and the risks you gamble with.
Gold Custodian and Broker
In order to put a portion of your retirement savings into a gold-backed IRA, you’ll need a Self-Direction IRA, as mentioned above.
However, for a gold-backed IRA, it is important you appoint a broker who will buy the gold for you and a custodian who will make a gold account for you and manage it.
The company you choose to create and manage the account will be responsible for storing or holding the gold you buy.
Custodians are usually either credit unions, banks, brokerage establishments, savings and loan companies, or trust companies.
All these establishments are recognized and authorized by the Federal agencies to facilitate your gold IRA and provide you with asset custodial services, which they also provide to other investors as well as financial advisors.
It is important to understand that custodians are not responsible for appointing a dealer for your IRA; that is your responsibility.
However, renowned and recognized custodians do have strong links with a plethora of metal dealers throughout the whole of the country – which means they may or may not choose to share their links with you.
However, the opposite can also happen; there are a handful of precious metal dealers that will recommend you appoint an IRA custodian.
But the choice of selecting and hiring a custodian is entirely up to you.
Due to the fact that investors are faced with a plethora of choices when it comes to gold IRAs, determining which company to go with can become increasingly frustrating. And that is primarily due to the fact that it is a specialized process that top-level brokerage companies refuse to offer.
In light of this, mentioned below are some very important pointers to take into account when you look for a custodian:
Transparency – First of all it is important you take an overall look at your costs upfront.
This will help you dodge a curveball, which is usually in the form of hidden costs that strike as soon as you make an investment.
Performance – It is paramount that you look for an establishment that has an extremely consistent and successful track record.
Look for a company that has positive reviews by objective third party agencies such as the Business Consumer Alliance (BCA) or the Better Business Bureau (BBB).
Moreover, don’t just stop here, look up at other customers have to say about the respective firm – are there any complaints registered?
Flexibility – There is no doubt about the fact each investor has a different approach, a different set of strategies, a different mindset, and different goals.
Look for a company that specifically provides services that match your core fundamentals of investing and philosophy. Don’t go for the one-size-fits-all methodology.
Accreditation – Always select an establishment that is highly accredited and reputed, and has all the fundamental requirements such as registrations, insurance, licenses, and bonds to ensure that your investment with them is impeccably protected.
Always ask them to furnish all verifications pertaining to their licenses and all other information they provide you.
On the other hand, there is another possible way to avoid having to waste your time looking for a custodian and steer clear of the costs associated with it – and that is through opening a ‘checkbook IRA’.
But it is worth mentioning that the Internal Revenue Service is looking for ways to scrutinize this form of IRA (which does not require investors to appoint a custodian).
On the other hand, you have to understand that establishing a checkbook IRA can be increasingly complicated.
First of all, in order to open one, you need to be an LLC and have a business checking account, and these are just a couple of requirements.
But on the bright side the checkbook IRA enables you to buy and personally store Gold Eagle coins, which is a product of the US Treasury.
But before you jump to open a checkbook IRA, it is strongly recommended that you consult with a qualified financial advisor.
Should you go for a Gold-backed IRA?
If you want to effectively hedge against inflation keep far away from your investment portfolio, maintain the real value of your money and enjoy an advantage from future gold prices shifting upwards, then your best bet is to dedicate a portion of your retirement wealth to a gold IRA.
Plus, gold IRAs are not any more or less complicated than other traditional IRAs – on top of that, gold IRA involves considerably fewer investment strategies and critical decisions compared to, let’s say, an IRA that has a stock portfolio and has to consistently by balanced, evaluated and monitored.
Of course, you should expect downsides to gold-backed IRAs as well.
When you talk about the potential for portfolio growth, gold IRAs have the slowest growth potential compared to stocks, mutual funds, and bonds.
And that is understandably due to the fact predicting gold prices 10 or 20 years from now is something even brilliant financial analysts can have trouble conjuring.
Will Gold Resume its Uptrend?
Due to the fact the Federal Reserve keeps on printing money and continuously pours it into the economy, it has become an increasingly difficult task to keep a finger on when gold will start to increase in price.
According to historical records, an increase in money has does not significantly impact the economy in the initial months – it is after 9 to 18 months have passed that effects beings to surface.
Then add another year for the effects to sink into consumer price inflation.
In simpler words, the Fed is always looking to drive the economy with a loose steering wheel.
However, after a few disappointing trends, gold is beginning to increase in value – better yet it has also become one of the best performing precious commodities, which is expected to shine this year as well – there is an exponential number of growing trends that are playing in gold’s favor.
The primary reason why gold could not perform as per the expectations of investors is because of the federal government’s ‘quantitative easing’ program, which enabled the Fed to print money by the truckload to facilitate the financial markets in one of the biggest economy’s in the world – that is after the credit crises and the recession.
This is essentially the reason why investors invested in gold; the US dollar was continually declining. Gold has become an anti-currency tool.
Buying Gold the Right Way
Buying precious metals like gold and silver is quite simple. But what can make it complicated is if you are pressured into investing in gold products you have no clue about. With the understanding of how to make a general purchase, you will be successfully able to steer clear of any pitfalls. It is just like riding a bike, once you master the basics, riding your bike becomes second nature.
The three basic fundamentals of buying gold or silver are spot price, premium, and mark-up. The spot price is what big-game investors and bullion banks pay in marketplaces, for example, commodities exchanges located in London, Hong Kong, and New York. The trades they invest in primarily consist of futures contracts, where gold buyers don’t get physical delivery.
Next up, are billion-dollar wholesalers of physical gold and silver bullion products who have the capability to directly purchase from a plethora of national mints on a global scale at prices, which top the spot price by a small margin.
However, wholesalers like that are quite a few in the US – on top of they don’t sell gold or silver bullion to individual gold-backed IRA investors.
What these wholesalers essentially do is include marginal profit as well as include overhead costs, which is known as a premium, and then sell the bullion to retailers. The premiums can considerably differ, taking into account the market conditions, the demand, and supply of gold, the type of gold production, and the need for it.
After the retailers buy the gold from the wholesalers, they sell the bullion to individual investors interested in converting to gold.
However, the retailers will sell you the gold at a mark-up, which is basically the retailer’s overhead costs and profit.
So, if the dealer ends up paying a 3.5% premium, which would be above the spot price for gold bullion, and proceeds to sell it at 5.5% (above the spot price), the dealer’s mark up would amount to 2% points.
In volatile market conditions, gold buyers should spend less than 7% over the spot price for gold coins. However, you have to understand that the fact that you will have to pay more for popular gold bullions products, for example, the American Gold Eagle coin or a coin that is manufactured at a private mint.
Testing the Gold Dealer
There are a couple of things you can test when you’re on the phone discussing a possible gold purchase from a retailer. Here are some things you should consider strongly before confirming a purchase:
Are you Absolutely Sure about the Product being offered?
There is nothing more important than to first familiarize yourself with the type of gold or silver products you wish to invest in. Well, there aren’t many products out there, but you should do some research into the type you want. Here is a list of the types of gold and silver bullions commonly bought and traded:
- American Eagle Bullion Coins
- Canadian Maple Leafs
- South African Krugerrands
- Austrian Philharmonics
- Australian Kangaroos
These gold and silver bullion products are some of the widely made coins. So, if your retailer tries to compel you to buy another type of coin and claims that this is somehow a far better option to consider, put down the phone and locate another dealer.
Acquaint Yourself with the Prices and Fees
Before you pay for your gold, an accredited and renowned retailer will always be able to tell you what the current price of the gold is, above the spot price of course, and whether or not you have to pay the taxes and fees associated with that type of bullion.
A good retailer will efficiently and accurately be able to quote an exact dollar amount for your purchase before processing the order.
When it comes to a business transaction it is necessary to make the deal with a financial establishment that you trust. So, if the retailer you are on the phone hesitates or fails to give an exact price on the gold bullion you are interested in buying, immediately hang up.
Will the Dealer Buy Back the Gold you are purchasing from them, and if so, What Price will they Offer?
This is one of the most important tactics when you talk about identifying a scammer versus a renowned and reputable gold retailer.
Gold scammers will always try to stick you products that have zero value or have a significantly lower value than what the scammers are asking for.
This means two things; the scammer will either never buy his own product back and/or buy at a considerably lower price than what he sold it at.
On the other hand, a legitimate dealer only earns a couple of percentage points on a gold transaction – which essentially means that he will always be ready to purchase his product back on a price that the dealer pays to his wholesalers.
Problems of Storing Actual Gold Yourself
When buying gold you do have another option, which is to physically store the gold at your home. A majority of people who have a rather pessimistic view of the economy – who believe that it could go down any time – value the physical possession of gold when including precious metals into their Individual Retirement Accounts.
Why? Well, they believe that if the economy begins to substantially plummet, they will be hanging on to physical gold, which would no doubt have a very high value.
Although you can do that too, the risk is just too much. For instance, you will have to first make all the necessary arrangements to store the gold safely in a vault or another secure facility that you own.
Secondly, with all that gold sitting in a vault in your home, it is impossible to expect to increase in value or earn any interest for you.
The only way you could make money with it is if the price of gold shoots up and you sell all or a portion of it.
However, if and when you decide to sell your gold, you will also have to worry about securely transporting it to the dealer or to the individual buyer, which could be risky as well.
You risk a high chance of losing it or getting it stolen along the way.