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Why a Gold-Backed IRA?

Picture your retirement account converted to gold by investing in a gold-backed IRA, which a lot of people are indulging in these days.

Smart savers when it comes to retirement investments have been increasingly focusing on utilizing assets in their IRA accounts to own precious metals – gold to be more specific.

More and more savers are making gold-backed investments as a primary vehicle for investment.

Why?

Well, statistics show an alarming decrease in the value of the dollar, which has become a major complication for American citizens who are continually struggling to save for their retirement via dollar-backed assets.

Did you know that from 1792 to just recently, the dollar lost its value by more than 99.95%?

The Decline of the Purchasing power of one US dollar (USD) in every year from 1635 to 2020

Chart shows the declining value of the us dollar since 1635, a compelling reason for a gold backed IRA.
The Declining Value of the US Dollar Since 1635

 

This has made saving impossible over time to generate money earned today to sustain a standardized way of life in the future.

Ultra-High Net Worth Individuals Allocate 81% of their Portfolios to Alternative Investments

A recent article on The Motley Fool (fool.com, 2021) states that Ultra High Net Worth individuals (individuals that have a net worth of at least $30 million dollars) allocate 81% of their portfolios to alternative investments.

The author defines alternative investments “as a broad term that encompasses tangible assets, like wine, baseball cards, cars, art; and commodities like precious metals, real estate, private equity, private credit; and investments in hedge funds (Caporal, J., 2021).”

If  Ultra High Net Worth individuals are allocating assets to precious metals, why shouldn’t you?

The Scarcity of Gold

It is important to understand that gold is becoming increasingly scarce, which means that the Federal Reserve, as well as US central banks, cannot produce it as they wish.

An article in Investopedia (2021) states that:

“Gold is abundant enough to create coins but rare enough so that not everyone can produce them. Gold doesn’t corrode, providing a sustainable store of value, and humans are physically and emotionally drawn to it. Societies and economies have placed value on gold, thus perpetuating its worth.”

Gold is the metal we’ll fall back on when other forms of currency don’t work, which means that gold will always have value in tough as well as good times.

This gives individual investors peace of mind that the gold they buy will maintain its value over time, significantly enabling investors to gradually grow their wealth, especially at a time when they really need it.

How do I qualify for a 401k to Gold IRA Rollover?

When investors add gold to their portfolio and convert their Individual Retirement Accounts to gold through gold-backed IRA rollover accounts, they continue to benefit from the same types of tax benefits upon acquiring and including precious metals in their IRA.

Moreover, the rollover procedure is relatively convenient; a majority of investors have chosen to opt for the services of an efficient and effective Gold IRA establishment that can considerably help them to through the entire procedure, ensuring that all individual investors abide by the regulations imposed by the IRA, which govern gold-backed IRA rollovers.

The advantage of buying and owning gold without having to invest money has significantly increased the retail scope and demand for gold and silver bullion, coins as well as numismatic coins, which carry historical value.

In order to be authentically eligible for owning a gold and silver-backed IRA, there is a set of essential and specific criteria that need to be met.

  • Your gold coins and/or bullions have to adhere to the finesse and standards of the IRS.
  • Your gold must be kept with an IRA trustee and not with the owner of the IRA.
  • The gold you purchase will have to be stored in a depository that is approved by the IRS.
  • You cannot store or keep your gold bars, coins, and bullions at your home.

Why Invest in Gold?

Gold-backed Individuals Retirement Accounts appeal to investors who wish to have a more diversified investment portfolio.

And that is primarily due to the fact that Roth IRAs and other traditional IRAs depend on mutual funds and stocks – which are and always will be subject to market volatility as well as inflation.

And because the price of gold travels in the opposite direction of the dollar or any other paper currency or currency-based assets (see this graphic) – including gold in your retirement portfolio grants you a powerful hedge against short and long-term inflation.

This calculative and balanced strategy for creating a valuable IRA streamlines the risks involved, especially when you talk about the long-term, which inadvertently makes gold-backed IRAs an increasingly wise option for individuals investing in their IRAs.

Gold Trends Increasing

From 2006 to before the recession devastated the US economy, there was little to no demand for gold IRAs, which was primarily due to the long and complicated process and transaction, which only the most determined of investors were willing to chase.

For example, first of all, you need to locate and hire a custodian or an IRA-recognized trustee and a depository to store the gold.

After that, you would have to invest in your desired precious, mainly gold, which had to be approved by the IRS. So, it was a grueling process.

But up until the recession hit in 2008, the demand for gold-backed IRAs exponentially increased and became ever so popular.

And since then record gold sales, amalgamated with the presence of several companies simplified the process of acquiring and storing gold, making gold-backed IRA portfolios a one-stop shop for interested investors.

Furthermore, the sudden and powerful impact of world economic news confirmed an increasing trend in the purchase of gold IRAs, which continued mainly due to the inflationary downfall of the Fed’s ambitious stimulus programs – and also because of an abrupt addition in geopolitical volatility.

The Special Risks Associated with a Gold-Backed IRA

There is no doubt about the fact that all investments carry some form of risk as well as monetary rewards, which includes gold-backed IRAs.

In a sense, gold IRAs can be subject to similar risks that any other traditional investment vehicle is exposed to.

The price of this precious commodity can also fluctuate rapidly and be exposed to volatility – and it is quite an analytical nightmare to accurately predict where gold prices are headed in the future.

And because risk is an essential part of your investments, you have to understand that there are still very powerful reasons you should commit a small portion of retirement money to buy gold.

Did you know that gold was used as an effective store of value even 5000 years ago?

And speaking about value, you do know what happened with Lehman Brothers, right?

Their stock plummeted to 0 and investment bonds can just as easily default.

You have to realize that the value of the US dollar has exponentially plummeted, but the value of gold will never go down to zero.

References

Caporal, J., 2021. 81% of Ultra-High-Net-Worth Individuals Use Alternative Investments. Retrieved from: https://www.fool.com/research/high-net-worth-alternative-investments/

Tardi, C., 2021). Why Has Gold Always Been Valuable?  Retrieved from: https://www.investopedia.com/articles/investing/071114/why-gold-has-always-had-value.asp