Gold Backed IRAs – The Benefits and Risks

goldWe’re always told to save money for our retirement years, and an excellent way to do that is to place your money in an IRA, which allows you to invest your money into a portfolio of stocks and bonds. But if you prefer to invest in metals, there is an IRA for you.

What is a gold-backed IRA?

Gold-backed IRAs are one form of precious metals IRAs, which allow you to fund your IRA with certain precious metals that have been approved by the government. Gold is the most well-known of these metals, though silver and platinum can also be used. In order to have a gold-backed IRA, you must actually hold physical gold in the form of either 24-karat bars of bullion that can weigh up to 400 ounces, or pure gold coins. In recent years it has become legal to use coins from other countries as well as those made domestically.

What are the advantages to a gold-backed IRA?

Gold is one of the best hedges that you can make against a falling stock market or a falling dollar. If the stock market goes down, the value of a standard IRA will also fall, while high inflation can mean your IRA is worth less. With gold, your IRA’s value would increase in these conditions, since people who see it as a safer investment will always want it over more volatile stocks. They’re also simpler than other IRAs in many ways, since they’re self-directed and don’t require as much monitoring as an IRA based on stocks and mutual funds.

What are the disadvantages?

To own gold you need to hire an investment firm to properly store it, and these firms can charge annual fees as high as $200. Another potential problem is that if the economy booms during the time you hold the IRA, the value of gold will drop, sometimes dramatically. This makes the growth potential for gold-backed IRAs much lower, and much more uncertain, than an IRA backed with stocks. In addition, gold IRA rollovers don’t allow the advantages of diversified holdings that other IRAs offer, and as we all know, it’s risky to put all of your eggs in one basket, especially if you have golden eggs. One of the biggest advantages is also a disadvantage. Since they’re self-directed, you have no experts with you that know what to do in bad times, and this can be problematic.

So in conclusion…

These IRAs, like any investment, have plenty of risks and just as many opportunities. You should weight this as a potential option when you consider how you’ll save money for your retirement. You can also just place some gold in your IRA, and use CDs, stocks, and bonds for the rest. This way you’ll have excellent chances of seeing plenty of money, no matter what storms the economy may face.

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