Why Gold IRA Investing is an Excellent Option for Your Financial Future
In these days of financial turbulence, many wise investors are protecting their retirement assets by opening a gold-backed IRA account.
There are many reasons why having a gold IRA makes sense, especially now, but let’s try to put it in the simplest terms. When it comes to investing (and that’s what an IRA is an investment), there are two bits of wisdom that financial advisors commonly tell you: Diversify. That is, don’t have all your eggs in one basket.
It is criminal to ignore your financial future. You must begin making plans for your retirement. To most people, the first thought that comes to mind is investing in the traditional IRA simply because this is the only thing that they know. To invest effectively, it would be prudent to consider strategies that include gold IRA investing. This form of investment is a simple testament of your readiness to back your IRA plan with gold.
Not dependent on US Dollar
It may seem old fashioned, but it is still possible to place some of your wealth and prospects into the ancient practice of hoarding gold. Gold has been the standard of wealth for centuries, in almost every culture that requires some system of barter, from Europe to Asia to South America.
Traditional IRAs often depend on the value of the US dollar at any given moment, which keeps fluctuating all the time. A retirement future should never have to depend on the fluctuating economy or currency. Although the price or value of gold fluctuates, it does not do so at the same level as currency or US dollar. Although investing in gold IRA is beneficial in many aspects, talk to an expert about the available opportunities first.
Shrinking money in the bank
The money that you keep in a bank account to safeguard your financial future keeps shrinking in value because of many factors – including the fact that the government has to keep printing more money to clear it’s debts. Therefore, keeping your money in the bank is not an excellent way for safeguarding your financial future. Investing in real estate and stocks has it’s own challenges, thus the wrong decision to make in terms of safeguarding financial future.
Gold outperforms Stock market
Investing in gold IRA is great considering that gold has outperformed the stock market for a long time – from as far back as 1971. Since 2006, the price of gold has risen and fallen to around $35,100 per kilogram. In 2006, a kilogram of gold cost around $15,000. Between 2011 and 2012, the price of gold reached a peak of around $58,900. Despite the fall in price from 2013 to 2015, gold IRA investments are the best at guaranteeing financial future compared to stock market.
Why gold prices fluctuate
The diversified portfolio has a small position in the gold market. For some investing in gold means holding gold coins. Some speculators buy gold contact futures on the commodity exchange. Future contracts are risky because you are betting that the price of gold will go higher in the future. The contract requires a relatively small up front payment, but there can be daily fluctuations that require you have funds to to cater for fluctuations.
Under a free market economy, the price of gold, just as it is the case with other commodities, will rise and fall. When it comes to gold, the fluctuation in prices is often because of the following factors:
- Central bank buying considering that these institutions have never been net sellers of gold but have become net buyers of this commodity since 2009
- Currency debasement since the price of gold always goes up when that of the US dollar drops
- The safe haven that gold provides during periods of economic uncertainty around the world
Gold IRA Rules
If you are considering opening a gold IRA, you must realize that, although gold IRAs are subject to the general IRA rules, they are also subject to a special set of rules that apply specifically to precious metals IRAs.
Basically, the “special” rules applicable to gold IRAs exist because the IRS does not normally allow “collectibles” as an investment in an IRA, and the IRS’s definition of collectibles specifically includes “metals” and “coins.”
So, if metals and coins are not permissible IRA investments, how can precious metals IRAs even exist? Fortunately, the IRS has made an exception to the “collectibles rule” to allow specific types of “metals” and “coins” as permissible IRA investments.
Gold coins approved for Gold IRA accounts
Investing in gold IRA offers proper protection against inflation and deflation. It performs better in this regard compared to paper assets such as currency, promissory notes, bonds and stocks. Gold IRA is the best investment for the retirement days because of the security that it provides to your present and future financial position. The diversity of gold coins that IRS allows investors to hold in their gold IRA accounts includes the following:
- American Gold Eagle Bullion
- Uncirculated American Gold Buffalo
- Proof American Gold Eagle coins
- Chinese Gold Panda
- Canadian Gold Maple Leaf
- Australian Kangaroo/Nugget
- Austrian Gold Philharmonic
Related Topic: Early Retirement Planning – How to Make it Happen
To summarize, a gold IRA or, more generally, a precious metals IRA is an individual retirement arrangement like any other, with the exception that it is specifically structured to hold IRS approved forms of physical precious metals and coins as an investment.
In addition to being subject to the general rules controlling IRAs, precious metals IRAs are also subject to specific rules pertaining to the types of metals and coins it can hold for investment.
Gold and other precious metals IRAs are coming into their own recently, primarily because of the debasing of the U. S. currency by the Federal Reserve.
Many investors have come to the realization that the dollar will be unable to sustain its purchasing power in the face of the overwhelming money printing ($85 billion per month) by the Federal Reserve under its quantitative easing program, which shows no sign of ending, or “tapering.”
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