What are the benefits of a Precious Metal IRA?
There is an old proverb: “Don’t put all your eggs in one basket.” No matter the context, this phrase means don’t risk losing everything by having only one plan or idea and then depending entirely on that one thing for your success.
This is particularly true when it comes to saving for retirement. Investing in precious metals can be a great way to diversify your savings and leverage the unique benefits of precious metals. Take a look at some of the benefits of a precious metal IRA:
1. Diversify your retirement savings
It is worth repeating: don’t put all your eggs in one basket. Diversification will help safeguard your savings. This diversification has played out positively in previous periods of economic difficulty. For example, during the 2008-2012 recession, not just gold but also silver showed off its ability to endure through economic crisis; even in the most harrowing conditions, it continued jumping up in value by almost 450%.
More recently, a scientific study showed that diversification in precious metals helped investors endure the economic volatility in 2020 during the early days of the COVID-19 pandemic.2
You get the idea here. Generally, all metals deemed “precious” make great hedges against economic downturns.
So, if you want to move some of your retirement into a precious metals IRA, the gold or silver that you select will provide many of the same benefits.
2. Limited supplies could result in future gains
Precious metals are finite; that’s what makes them precious. And as silver and gold continue to be used in medical and industrial sectors, there will be sustained demand for them. Plus, their rarity can contribute to sustained or increasing value over time, especially as global demand rises for both consumer and industrial purposes.
3. Secure your purchasing power
Longtime investors in gold and silver have seen their holdings maintain their purchasing power. As the U.S. dollar declines, the value of precious metals usually goes up.
Time and time again, gold’s performance has been demonstrated to correlate inversely with economically-sensitive assets. When the value or purchasing power of the dollar goes down, the price of gold tends to increase. Because of this, diversifying a portfolio by investing a portion of it into precious metals such as gold can help stabilize a portfolio’s value over time.
The fact that gold is a tangible asset – as opposed to an IOU or a printed promise of future value – adds another layer of diversification and security to your savings. Since precious metals have tangible value and have historically enjoyed demand based on their utility, they’re historically guaranteed to have lasting value over the long term, even though prices fluctuate day to day.
4. Hedge against inflation
The value of precious metals isn’t dependent on government policies, which means metals like gold and silver tend to hold value better and protect you from inflation. Precious metals have intrinsic value, meaning their price is based as much on their inherent utility as on their popularity.
Historically, gold, silver, and other precious metals tend to hold their value in the face of inflation. If your retirement savings include precious metals, this can provide some peace of mind that your purchasing power could be preserved (without having to keep working long past your ideal retirement date).
5. Tax benefits
Purchasing precious metals for placement in a precious metals IRA can offer unique tax benefits, depending on the type of IRA. Traditional precious metal IRAs offer tax-deferred growth, while Roth precious metal IRAs offer tax-free growth.
6. Converting to a precious metals IRA is simple
Jumping through a bunch of hoops is not required. All it takes is an eligible 401(k) or an IRA (or other less common retirement accounts) to easily transfer to an IRA backed by gold, silver or other precious metal assets.
Risks of Precious Metal IRAs
While precious metals are fairly stable as an investment over long periods of time, there are risks with precious metal IRAs worth considering before opening a precious metals IRA.
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- Account fees: One consideration is fees. No matter the type of retirement account, you will have to pay for management fees. Most IRA custodians will charge storage and maintenance fees to keep your precious metals protected, which can cut into your earnings.
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- Eligibility requirements: Another consideration when investing in precious metals is that not all precious metals are IRA-eligible. Working with a reputable precious metals dealer, such as Birch Gold Group, can help ensure you’re investing in precious metals that meet purity requirements and are IRA-eligible.
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