If you would like to supplement the amount of Social Security income you’ll receive when you retire, you may want to utilize an individual retirement account (IRA). According to Goldco, “Making an investment in gold is a smart thing to do ahead of retirement because it is not as risky as other assets. Paper assets like stocks, bonds, mutual funds, and most investments on the NYSE, Nasdaq, and other stock exchanges are generally more volatile in terms of maintaining wealth.”This investment vehicle is tax-deferred and available in a few different types.
How Does an IRA Work?
An IRA allows you to invest and save money for retirement. It’s beneficial to use due to its tax advantages. In some ways, you can look at an IRA as a savings account that provides you with tax advantages on your investments. You may choose to use a full-service brokerage IRA that is managed by a professional or a self-directed IRA where you can allocate your funds based on your goals and decisions.
Different Types of IRAs
Traditional, Roth and SEP IRAs have restrictions on the type of assets you can use for your investment. These typically include mutual funds, stocks, bonds and CDs.
- Traditional IRA: Your investment earnings will not be taxed as long as your funds remain in this type of account. This type of IRA can be advantageous if you’re currently in a higher tax bracket then you will be during your retirement. When you retire and withdraw your funds, you’ll be taxed at the current tax rate at that time.
- Roth IRA: This type of IRA is typically used if you anticipate paying a higher tax rate during your retirement years. Withdrawals during retirement are not taxed at all.
- SEP IRA: Similar to a traditional IRA, this type of account is funded and set up by your employer if you are an employee. Your earnings will not be taxed, but you will pay taxes on the withdrawals you make during your retirement years. This type of IRA allows a higher investment amount than traditional and Roth IRAs.
- SIMPLE IRA: This IRA is similar to a SEP IRA but does have a few different restrictions.
Precious Metal IRAs
While traditional and Roth IRAs are an excellent way to save for retirement, they don’t allow you to invest in assets like precious metals and real estate. Fortunately, an option was created for this, which is known as a self-directed IRA. This type of account allows you to make your own decisions and invest the amount you’d like. Using a precious metals IRA will enable you to diversify your retirement savings and safeguard your funds even more. This style of investing can be beneficial in helping you secure your purchasing power as the value of the dollar declines over time and the value of gold increases.
How to Put Physical Gold in Your Account
Using a physical gold IRA and funding it does come with some restrictions. You’re not able to use commemorative coins, gold you have in your possession or gold ETFs. To qualify, you’ll need to follow these guidelines with the gold you use:
- It must have a 99.5 percent purity
- It must be held in a secure depository by your custodian
- It must be an IRA eligible investment
To utilize a physical gold IRA, you’ll need to fund your account with cash, which does have a yearly limit. The next step is to choose the eligible coins you’d like put in your account and use a qualified trustee to store and secure them
Diversifying the funds you use for your retirement by utilizing a precious metals IRA can act as a hedge against traditional investments such as stocks or mutual funds when economic times begin to worsen. Having this type of balanced portfolio can help you spread out risk and not leave you so dependent on specific types of investments.