Investing in a traditional retirement savings plan has never been more accessible. The rise of online brokerages, automated investing programs, and low-cost index mutual funds have made it easier than ever for Americans to establish and manage an investment portfolio. However, not everyone is eligible to invest in a retirement account or trust. You must meet certain income, residency, and contribution limits depending on your tax bracket and the type of retirement account you qualify for. If you’re unsure whether an investment in a retirement account is right for you, check out this article that explores the benefits of investing in a gold IRA.
What Is A Gold IRA?
The term “gold IRA” refers to a retirement account that holds bullion. A gold IRA is a type of self-directed IRA (SDIRA) that allows you to invest in precious metals like gold, silver, and platinum. The account is self-directed because you choose the type of precious metals you want to purchase and how much of each you want to own. You set your own investment objective and make your own investment decisions. Because the investment is in bullion, there are no minimum balances or minimums on how much gold you can invest in your gold IRA. You can purchase as little as $100 worth of bullion at a time or as much as $500,000 worth at once.
What Is A Gold IRA Contribution Limit?
Like most traditional IRAs, a gold IRA has an annual contribution limit based on your income level for the year — not your tax bracket for the year. The IRS limits annual contributions to traditional IRAs at $5,500 for individuals who are under 50 years old, $6,500 for those between 50 and 59 years old, and $7,000 for those 60 or older. If you earned more than these limits during the year but don’t have enough money saved up in a traditional retirement account, consider investing in a gold IRA instead!
How Do I Invest In A Gold IRA?
You can invest in a gold IRA online through an online brokerage account like Scottrade or Fidelity. You can also invest in a gold IRA through a traditional brokerage like Charles Schwab. If you’re not comfortable with investing online or aren’t able to invest through a traditional brokerage, you can also contact your local bank or credit union and ask them to set up an account for you.
Gold IRA Benefits
Because you purchase the precious metals yourself, there are several benefits to investing in a gold IRA:
1) Tax-Free Income
The IRS does not tax precious metals like gold and silver as income. Instead, they are treated as capital gains when they are sold. Capital gains are taxed at the same rate as regular income earned from work, so no taxes are owed on the sale of bullion held in a gold IRA!
2) Low Management Fees
Commissions paid by online brokerages and traditional brokerages for investment management fees range from $10 to $50 per trade per quarter, depending on the size of your portfolio. These fees can quickly add up over time and eat away at your returns. Gold IRA accounts only charge commissions when trades occur, so there are no transaction fees!
3) Lower Taxes
Unlike stocks or bonds that pay dividends, precious metals do not pay out any cash at all when they’re sold. Instead, they produce capital gains which are taxed at lower rates than other investment types. For example: If you hold $10 million worth of stock in your retirement account each year but generate $1 million in capital gains (which is the amount of money you made minus the expenses you incurred), you would only owe taxes on $9 million worth of capital gains ($1 million less $10 million). If you sold your gold at the same time, however, your capital gains would be taxed at only 15% (the rate on long-term capital gains).
4) Higher Returns
Gold is a very stable asset that has historically outperformed stocks and bonds.
The price of gold has risen by over 700% since the 2008 financial crisis.
5) Protection from Inflation
As the Federal Reserve continues to print money, inflation will inevitably increase. Even worse, this is usually coupled with a weakening dollar. Investing in precious metals is a great way to protect your purchasing power and preserve your wealth over time.
6) Low Liquidity Problems
Because gold is not traded on the New York Stock Exchange or the NASDAQ, it’s extremely unlikely that you’ll ever encounter liquidity problems when selling gold. When buying and selling gold, you can feel confident that you can sell your metal at any time without having to worry about finding a buyer quickly or paying too much for your metal. As long as there are enough buyers and sellers, the price of gold will always be fairly priced based on supply and demand.
7) Easy Access to Gold
The gold you buy in a gold IRA is FDIC-insured, just like any other bank account, so you can access it easily if you need it. You can also sell your gold at any time without penalty, so if the price of gold goes up after you invest, it’s easy to take advantage of the higher price by selling some or all of your assets and reinvesting the proceeds!
8) No Withdrawals
As long as you follow IRS guidelines and maintain your minimum withdrawal requirements, there are no limits on how much money you can withdraw or trade into a gold IRA each year. This means that every year at tax time, there will be no penalty for withdrawing all or part of your account without penalty.
Benefits Of Investing In A Gold IRA For New Investors.
1) Low-Cost: Investing in a gold IRA is easy, free, and accessible no matter your income level. All you need is $3,000 to open your account.
2) Tax Advantages Of Investing In A Gold IRA: The next benefit of investing in a gold IRA is the tax advantages. When you initiate a gold IRA, you are able to defer tax on 50% of your investment. This tax-deferred deferral period can last up to 6 years and is particularly beneficial for higher-income earners who pay a higher percentage of their income in taxes.
3) Investment Returns: Gold is a commodity that is not only extremely rare but also extremely stable. Investing in a gold IRA ensures that you are not taking a risk on the price of gold. Instead, you can take comfort in the fact that you are investing in a commodity that has proven to be stable over the long term.
4) Time-Sensitive Investments: When choosing what to invest in, you want to ensure that you are investing in assets that will bring you a return. And while it’s important to choose investments that will bring you a return, it’s also important to choose investments that have a return that is timely. This can be a great benefit for investors who have a short time until they retire. If you’re nearing retirement, you want to ensure that your retirement savings account has sufficient growth to last you through your retirement. This is where a time-sensitive investment like gold can be a great benefit.
5) Gold IRA Beneficial For Existing Gold IRA Investors: Gold IRAs can be a great option for investors who already have retirement savings accounts.
Common Cons Of Investing In A Gold IRA For New Investors
1) Low-Cost Investing: One of the benefits that gold offers as an investment is low-cost investing. Because you don’t need to invest a lot of money, it’s easy to invest in a gold IRA. However, this does come with a few disadvantages.
2) No Withdrawals: Unlike traditional IRAs, there are no limits on how much money you can withdraw from your gold IRA each year. This means that every year at tax time, there will be no penalty for withdrawing all or part of your account without penalty. This can be a great benefit if you plan on withdrawing money from your gold IRA in the future – but it also means that if you don’t need the money, you can lose it by not withdrawing it before the deadline.
3) Investment Returns: Gold is often considered to be one of the more stable investments out there today. That being said, investing in a gold IRA is just like any other investment; the returns will depend on several factors, including how much money you put into it and what type of return you are looking for. While there are many different opinions regarding the best way to invest in precious metals, one thing remains true – diversifying your investments across multiple different types of assets will help keep your portfolio balanced and ensure that you get the best return possible regardless of which asset class has performed well over time.
4) Taxation: One of the biggest benefits of a gold IRA is that it gives you the ability to defer taxes on your gains. This means that you can invest in gold without paying any tax on your investment. However, this also means that if you choose to cash out your gold IRA, you will have to pay taxes on your gains.
5) Gold IRA Withdrawal Period: It’s important to note that while there are no limits on how much money can be withdrawn from a gold IRA each year, there is a 10-year withdrawal period allowed for investments with more than $1 million in value. This means that even with the protection of a time-sensitive investment like gold, there are still limitations when it comes to withdrawing funds from your account.
6) Gold IRA Withdrawal Limits: The minimum withdrawal amount allowed for a gold IRA is $5,000 per year. This means that as long as you keep your account balance within the $5,000 limit, you have the ability to invest as much money as you’d like. However, if your account grows beyond this limit, there are no limits on how much money can be withdrawn from your gold IRA each year.
7) Transferring Assets: When it comes to transferring assets from one type of investment to another (i.e., from a traditional IRA to a gold IRA), there are several different options that are available. One of the more common ways is through a “direct transfer,” where an individual transfers his or her assets directly between two IRAs without having to go through a trustee or financial institution. However, direct transfers only work if both IRAs have the same trustee and financial institution, and they can only be made in person (not by phone).
8) Cost: The cost of opening and maintaining an IRA varies depending on which type of financial institution you choose to use when funding the account and which investment option you select for the account itself. It’s important to note that while gold is considered extremely low-cost investing, it is not always considered low-cost compared with other forms of investing like CDs (certificates of deposit). For example, some banks will charge an annual fee of $50 to $100 for each CD you purchase. In addition, most banks will charge a fee for withdrawing a CD from your account.
9) Liquidity: The liquidity of a gold IRA is determined by the amount of time it takes for you to cash out your gold IRA. The longer it takes for you to withdraw funds from your gold IRA, the more liquid the account will be. You should also note that while there are no limits on how much money can be withdrawn from a gold IRA each year, there is a 10-year withdrawal period allowed for investments with more than $1 million in value.
Investing in a retirement account can provide you with a great source of retirement savings. However, it’s important to make sure you’re eligible to enroll in a retirement account and that you’re investing in the right one. Investing in a gold IRA is one of the most tax-advantaged investments you can make for retirement. The only downside is that it might turn out to be one of the most expensive.