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Are Gold Backed IRAs Safe?

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Nothing is more important to your financial future than ensuring you appropriately save for retirement.

Making these savings can sometimes be confusing: With so many options, how can you be sure you get it right?

Many people are turning to the time-tested insurance that gold can provide to an investment portfolio by investing in gold IRAs.

What are gold IRAs and how safe of an investment are they?  Keep reading to find out.

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Most financial planners agree that you should diversify your funds, allowing you to spread risk and reward opportunities over a variety of financial instruments. Gold IRAs can unquestionably be a critical component of this funding.

However, there are important questions you need to ask when it comes to your gold IRA. Chief among them: Are Gold IRAs safe? How can I safely invest in gold?

There's good news here: While nothing is guaranteed, gold IRAs are safe investments that can - and should - be an important component of your retirement portfolio.

What is a gold IRA?

First, let's answer the most important question: What is a gold IRA?

An IRA is short for an individual retirement account. This is a tax-advantaged account that enables you to invest in a variety of financial instruments - including gold - that you can then draw down in your retirement. IRAs can contain a slew of financial products, including stocks, bonds, mutual funds, ETFs, precious metals, and more.

IRAs are heavily regulated by the IRS, but there's good news: Investing in IRAs will come with certain tax advantages.

Depending on the type of IRA that you open, you may be able to reap some of these tax benefits, which may include withdrawing money tax-free, depositing tax money tax-free, and tax-free investment growth. 

These benefits are designed to encourage investors to save for their own retirement. A gold IRA contains literal, physical gold. An investor will follow a heavily regulated process to add gold to their account and store it in an IRS-approved facility. 

From there, they can sell the gold when they reach retirement age, turning that gold into cash. Investors can then withdraw that cash. A gold IRA can be made of actual precious metals.

It can also contain precious metal-related securities, like stocks in gold companies. As such, you can achieve some diversity within your gold IRA.

The safety benefits of a gold

First, it's important to understand a critical component of gold: It typically gains value and has outperformed many similar asset classes.

Indeed, gold tends to gain the most value in times of economic crisis, as investors move away from other financial investments - like stocks and bonds - and move towards the safety of gold.

This was particularly the case during the height of the financial tumult that followed the COVID-19 pandemic when gold briefly hit $2,2028 an ounce - a price it is only now, in this inflationary period, just reaching again.

Similar gains have been recorded whenever there is a major financial or geopolitical crisis.

Gold's status as a safety mechanism is relatively unquestioned in a modern economy, and it has served this role for centuries; after all, the United States dollar was originally tied to the gold standard. The reasons for this include the following:

First, gold tends to maintain its value. Unlike other financial mechanisms - like stocks, mutual funds, or ETFs - gold tends not to be subjected to wild swings that occur as a result of economic news. The fact that it is physical, as opposed to a financial instrument, gives investors more comfort.

Gold's price stability is enhanced by the fact that it is one of the oldest precious metals that has been traded, with its place in the financial markets having existed for literal centuries.

Gold provides an excellent hedge against inflation. When inflation is high, stocks typically decline, leading investors to move their money into a safer financial instrument. In this case, precious metals like gold can be extremely beneficial.

Owing to its safety and high demand, gold is a relatively liquid investment. If you need money, you can typically sell gold quickly and have the money in your accounts in a relatively quick period.
Gold is also easy to buy.

There are a slew of gold vendors available that allow you to purchase gold. Buying gold for an IRA is still complicated, but again, there is not a lack of vendors to make this purchase.

Your gold IRA is safe

A gold IRA works differently than any other IRA in that a gold IRA is heavily regulated by the IRS. This means you can just take some random piece of gold jewelry and declare that it's part of your retirement account. The process can be somewhat cumbersome, but this is for your financial benefit.

To purchase gold for a gold IRA, you have to purchase gold from an approved custodian. This means that you can't take gold from your home and add it to your IRA.

The Benefits of Investing in a Gold-Related IRA

Again, this can be frustrating, but it is done to protect your ultimate investment, as it ensures that the gold you purchase for your IRA meets necessary weight and purity standards.

One of the most onerous requirements of any gold IRA is that the IRA custodian has to be approved by the IRS. To be approved, it must meet certain standards. One of them is that any gold purchased must be shipped to one of only ten IRS-approved depositories that are located within the United States.

As you can imagine, all ten depositories have extensive security and insurance requirements. This is done to protect you, your investors, and the government that is giving you these very significant tax benefits.

However, this can limit the gold you purchase or use for an IRA in many ways. As noted above, you can't just ship your own gold to an IRA. You have to buy it and have it shipped to the facility through your approved custodian.

Furthermore, you can't just access or withdraw the gold. It is kept in very specific security arrangements that ensure the gold is strictly monitored and protected. As you can imagine, all of this gold comes with extensive and modern security measures.

While these requirements may be frustrating, it is done for your benefit: Your gold will be safe, secure, and protected under these arrangements.

Security at these facilities is extensive, thus allowing you to buy gold and have the peace of mind that it will be safe when you need it.

Finally, all gold at these facilities is ensured extensively, thus protecting you in the extremely unlikely event of damage to the facility or theft.

Keep in mind that the very extensive requirements placed on a gold IRA are done for your benefit. Yes, it can be frustrating to have physical access to your own retirement account restricted, but this is done to protect your own investment and the investments of others who buy gold.

Diversification benefits

There's an old expression that applies to financial investments and society in general: Don't put your eggs in one basket. This expression is extremely relevant to your retirement account. Financial advisors typically argue that you should make sure to achieve some level of diversification of any stock portfolio you have.

This diversification exists on multiple levels and across many asset classes. An investment in gold is an alternative investment to typical stocks or bonds, and that means it may be worth considering.

As noted above, an investment in a gold IRA can ensure that your retirement savings are diversified from other methods of growth, like stocks and bonds.

This can protect you if the market moves one way, as gold typically provides a safety net.

There have been many years where an investment in gold actually beats an investment in stocks and bonds, including 2022.

That won't always happen, of course. However, it does point to the potential benefits of such an investment.

Gold will usually move in the opposite direction of stocks and bonds. As such, you should view an investment of your limited retirement accounts in gold as a safety measure. If the price of gold crashes, you can protect your finances by investing in this precious metal.

Gold also acts to maintain the value of your investment, even in times of inflation - like right now. Thus, this form of diversification can protect your account.

Benefits of Gold IRA

A gold IRA still allows you to gain access to the tax benefits that typically come with an investment in such an IRA. Investing in gold through your IRA means you can reap any gains in a tax-free way, plus make purchases or withdrawals tax-free, depending on the specific IRA that you purchase.

The Benefits of a Gold IRA

Furthermore, keep in mind that a gold IRA is not just related to purchasing precious metals.

You can also purchase gold-related stocks or bonds into your IRA, thus enabling you to reap the benefits of some specific gold-related financial instruments.

This allows you to achieve a level of diversification within the IRA itself.

Final Thoughts

Finally, remember that a gold IRA is self-directed. You have to work with an approved custodian, but you can determine the asset mix, what you buy, and what you sell.

You are the one who is ultimately in control of the types and amounts of gold that you actually buy.

As such, you can diversify the type of gold holdings as much or as little as you want, and you can do so in conjunction with a trained professional.

There is no doubt about it: A gold IRA is a safe and potentially lucrative investment. Tens of millions of people have successfully invested in gold to protect their retirement future.

Remember to read our list of the Top Gold Companies.

>> Click HERE to read our Best Precious Metals IRA Companies list <<


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