With Inflation increasing around the world, you want to protect your retirement portfolio from an economic crisis.
With conflict casting its specter over Europe, global energy prices have skyrocketed and stock markets have been in disarray. As the world begins to recover from the Coronavirus Pandemic, the economic crisis deepens.
During January, the tech-heavy US Nasdaq fell almost 9% and recorded its worst performance since 2008. The US economy is now facing the worst price inflation in 40 years. The US Consumer Price Index has risen 7.9% since February 2021.
If you are saving for your retirement, price inflation is a serious problem. That is because the real value of any cash you save is eaten away as prices go up. So where should retirement investors put their money as the global economy teeters on the edge of a possible recession?
Gold: The Safe Haven
The precious metal gold has always been seen as a safe haven when economic times get tough. We have seen the ‘safe haven’ effect this year as the Ukraine situation has worsened. From $1,811 USD per troy ounce on January 4, 2022, the price of gold has soared to hit a 2022 high of $2,039 USD on March 8, 2022. The price of gold has been rising since mid-2017, as you can see from the price chart below:
Source: World Gold Council: https://www.gold.org/goldhub/data/gold-prices
Gold is traditionally seen as a hedge against inflation. That is because there is a limited supply of gold (roughly 50,000 tonnes left to mine, according to the US Geological Survey). But, with the Fed happy to print money, there is an unlimited supply of fiat currency. Between 1973 and 1979 for example, the annual US inflation rate averaged 8.8% — and the price of gold rose by 35%.
So how can investors get in on gold over the long-term?
Gold IRAs: Own Real Gold and Beat Taxes Too
A gold IRA is a form of self-directed IRA with significant tax advantages that allows you to own real, physical gold over the long-term.
Setting up a gold IRA is simple if you use a reputable provider. There are three specialist services involved — custodian, bullion broker, and vault provider — and top-rated gold IRA providers like Regal Assets offer all three services under one roof for a flat annual fee:
- IRS-approved Custodian
The IRS demands that your gold IRA be overseen by an approved custodian.
- Bullion broker
You will need to purchase bullion bars and coins to stock your gold IRA. Only certain types of coins are permitted by the IRS, like the Gold American Eagle and the Canadian Maple Leaf. If you store the wrong coins, you may get fined by the IRS.
- IRS-approved Vault Provider
You cannot keep your bullion at home — you must arrange to have it stored at an IRS-approved vault.
You do not pay tax on any money you invest in a gold IRA. And you do not pay tax on any profits when you come to sell your gold. The IRS confirms that, if you are aged under 50, you can invest up to $6,000 a year in your IRAs. Over 50, and you can invest $7,000.
You can convert an existing IRA into a gold IRA. And you can run a gold IRA alongside other IRAs.
Gold IRA Pros
- Own real, physical gold.
- Pick your own bullion portfolio.
- Cut your tax bill when you buy your gold.
- Avoid tax on any profits when you sell your gold.
Gold IRA Cons
- Annual fees apply.
- Cannot access your physical gold.
Protecting Your Retirement Portfolio
You should not put all your savings into a gold IRA. Rather consider one as a small part of a diversified IRA portfolio including silver, stocks, real estate, cash, and even crypto. Diversification is a proven way of reducing financial risk.
Other ways of buying into gold include buying into gold mining companies or gold Exchange-Traded Funds (ETFs) using a stocks-based IRA. But ‘paper gold’ like this is viewed by some investors as a risk: if the whole financial system goes down, so does any asset value that is not physical. Champions of gold IRAs point out that nothing beats the reassurance of owning the cold, hard and priceless asset that is gold.
via this site