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Is Gold a Good Investment?
For years there was a joke that said that the best retirement security consisted of finding a goose that laid golden eggs. And while that might be a bit of fantasy for an investment plan, since 1997, there is a way to do just that, in a manner of speaking. It’s called a Gold IRA and its a type of IRA account that allows an investor to own precious metals such as gold, silver, platinum, and palladium as opposed to paper-based assets such as cash, stocks, and bonds.
In order to qualify as gold that can be held in an IRA, there are certain criteria that must be met. With a gold IRA, owners don’t actually take possession of the bars or bullion for keeping in their home or safes. As a result, the gold is kept by an IRS approved depository. For this reason, the fineness standards must be to the level of the IRA trustee, not the owner’s. All other rules about contributions, disbursements, and taxes apply, just as is the case with traditional IRAs.
Why Invest in Gold?
Generally speaking, gold prices have moved in the opposite direction of the value of paper assets. As a result, there are many investors who include gold in their retirement portfolio as a hedge against inflation. This balance helps to level out the risk that is inherent in other investments, especially over the long run. The strategy of including gold in an IRA portfolio is not only a smart choice for this reason, but it also offers another option for those who want to diversify their investments.
The financial crisis of 2008 is another reason that so many investors are taking another serious look at gold as an investment option. Further, the fact that with a gold IRA an investor doesn’t have to be concerned with the safety of his actual asset, there is another problem averted. The popularity of the gold IRA has also made the investment much more popular, which has led to a growth in the business of the “one-stop shop” for buying these asset. The result has been even greater popularity of gold.
How to Get a Gold IRA
The first step in getting a gold IRA is to establish a self-directed IRA, which is one that allows the investor to choose and manager a wider range of investment products. You will also need a broker who will buy the gold for you as well as a custodian who will create and administer the account. This is the company who will store and hold the actual gold that you are purchasing. Custodians can take many forms, but they are all approved by the government. These custodians can take the form of banks, credit unions, or brokerage firms who have been approved to provide asset-custody services.
Another matter that the investor is allowed to handle is the choice of the dealer for the IRA client. The custodians normally keep relationships with many dealers and they will share their list with investors in order that they may make a selection, even though investors are free to shop on their own for dealers they wish to work with.
A big drawback to investing in a gold IRA is that many major firms don’t deal with them. This makes the investor’s job of selecting a company a little trickier, but not impossible. When you do your homework, a lot of the complications involved drift away.
Here is some criteria that will make that job easier:
Transparency. Make sure you understand all of the costs involved in setting up an account. This is good for them and it eliminates surprises for you too.
Reputation. A good reputation on the part of the firm is easy to follow. If their reputation is good, people will talk about them favorably.
Flexibility. A good firm understands that investors and their investment goals are different. As a result, they offer flexibility in their investments, which making working with them easier.
Qualifications. You should deal with firms that have all of their approved licenses, registration, and insurance. Never deal with anyone who does not.
Under current regulations there is only one more way to get involved in this type of investment and avoid a lot of the fees and expenses that are inherent in them. That’s with what is called a “checkbook IRA.” The IRS is said to be scrutinizing this arrangement as this is written, but it is an option that offers more freedom than is standard and is worth watching for.