How to Diversify Your IRA with Gold

Investing in stocks is a traditional way to save for retirement. If you’re doing this with a regular brokerage account, you may want to look into the benefits of opening an IRA account. Doing so can provide you with tax benefits while you save for retirement.

Understanding IRAs

Two of the most popular IRAs include the traditional and Roth IRA. Investing in these accounts provides you with the following tax benefits:

– Traditional IRA: If you’re investing in a traditional IRA, you receive a tax deduction during the year your contribution is funded. Contributions are made using pre-tax income, which allows you to avoid paying taxes on the funds you put into the account. As long as you leave the money there, it will grow tax-deferred until you withdraw it during retirement. At that point, you’ll pay taxes on any distributions.

– Roth IRA: Investing in a Roth IRA allows you to invest money after taxes. Similar to a traditional IRA, your funds can grow tax-free. However, when you retire and take contributions, you won’t pay any taxes.

While these two options offer tax benefits, you aren’t able to hold physical assets in them. Fortunately, another type of IRA account was created that allows you to do this. It’s known as a self-directed IRA and has the following features:

– Self-Directed IRA: Choosing to use a self-directed IRA allows you to utilize stocks, mutual funds, bonds and several other types of investment vehicles. These assets can include physical precious metals, cryptocurrency, real estate, livestock and many other physical assets. Using this type of IRA allows you to diversify your holdings, which can minimize risk, especially during poor economic conditions.

How Do You Diversify Your IRA With Gold?

Individuals have been purchasing gold for thousands of years to preserve their wealth. Adding precious metals to your portfolio can be an excellent way to diversify your holdings, fight inflation and hedge against poor economic conditions. You can utilize this strategy by opening a self-directed IRA. Following the steps given in a gold IRA guide shows the path that needs to be taken when you want to open and fund this type of account.

Opening and Funding a Self-Directed IRA

One of the first steps is to find a reliable custodian to open and manage your account. They understand how the process works and can ensure that IRS regulations are followed. You can use cash funds to do this, and according to Goldco, “it’s even possible to rollover your 401(k) into a gold IRA.” There are guidelines on the dollar figure of contributions you can make each year, and you can use either a self-directed IRA or self-directed Roth IRA account, depending on the type of tax benefits you want.

Purchasing Gold for Your Account

After a custodian reviews your funds, you can purchase physical gold and place it in your account. The gold you are buying is held in a secure depository by your custodian. Keeping your gold at home is not recommended. While some companies advertise this option, it’s probably not a good idea if you want your investment to stay safe. Regulations require you to utilize gold coins that meet specific purity standards. They must possess an amount equal to or above 99.5 percent gold. Some of the most popular examples of these gold coins include the American Eagle, Australian Kangaroo, Austrian Philharmonic, Canadian Maple Leaf and the United States Buffalo Gold Uncirculated coin.

Why Is Gold Worth Holding in Your Portfolio?

Utilizing investment vehicles, such as mutual funds, bonds, stocks and ETFs, is a popular way to diversify your portfolio. However, owning these assets presents a higher risk during certain market conditions. Adding gold or other precious metals, like silver and platinum, to your holdings can lower your amount of risk and reduce the wild swings you might experience in your account during a slouching economy.

Many investors start gravitating towards gold during periods when the stock market might be diving. Owning gold can hedge against this type of market and provide you with stability in your portfolio. Having an asset in your account that performs better than other investment vehicles when there is uncertainty in the market can be an excellent long-term investment strategy that you can utilize to keep your assets protected.

Diversifying your portfolio with physical gold can help protect your portfolio from adverse market conditions. Utilizing a self-directed IRA is one of the best investment tools you can use to efficiently accomplish this task.


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