CNN Money Answers The Question “Are You Better Off Than Your Mom and Dad?” The Good News-Young People Still Believe In The American Dream
Jim Hitt, CEO of American IRA-A National Provider of Self-Directed IRAs, says “Things are pretty spooky. The United States, fresh from a downgrade on its bonds, was unable to come to an agreement to cut the ballooning deficit. Meanwhile, the European Union is teetering on the edge of collapse because of its own inability to get its fiscal and monetary house in order. And Iran is building nukes – and inviting a military response that could disrupt the flow of oil from the Persian Gulf.
With all this negativity it is encouraging to see that young people still believe in the American Dream and why shouldn’t they?! It’s within reach especially with the right tools at their disposal-Self Directed IRAs are an important part of that tool box.”
Successful gold investors feel that gold is the perfect hedge against chaotic times. When economies zig, gold zags. The value of gold, priced in dollars, tends to rise under conditions like these:
- Economic or political chaos or uncertainty
- Runaway government spending
- The debasement of currency by central banks (i.e., ‘quantitative easing’)
- Wars and the threat of wars
- High oil prices or the threat of a disruption in supply
- Inflationary periods
- Poor investing environments in stocks and bonds
- Low yields, thanks to “easy money” policies and/or a ‘flight to safety’.”
While gold doesn’t pay a dividend, in some ways it is the ideal retirement asset: It has intrinsic value. It is reasonably liquid; it is volatile enough to warrant being a long-term holding. It provides a diversification benefit against stocks, bonds, real estate, small businesses and employment fortunes. And together with real estate, it may be among the few assets in their portfolio that can never go to zero. In fact, the worse things get, the better gold is likely to perform.
Owning Gold in an IRA?:
Individual Retirement Arrangements aren’t limited to stocks, bonds and mutual funds. IRA’s can invest in a wide variety of valuable assets, including certain kinds of gold. No, they can’t use an IRA to own jewelry or other collectibles. But they can own gold bullion and coins, including American Eagles, Canadian Gold Maple Leaf coins, American Silver Eagle coins and American Platinum Eagle coins. They can also own gold and silver bars, provided the purity is at least 99.9 percent. They cannot own South African Kruggerands, however, among some other prohibited coins.
They cannot own jewelry in an IRA. And they cannot take physical possession of the gold. Otherwise the government will consider the amount they take possession of to be a distribution – subject to taxes and penalties.
Instead, investors who want to own gold within an IRA must find a trustee who will set up a special account called a ‘self-directed IRA.’ The trustee will help them select a custodian, who will hold the gold on their behalf.
Like all other IRA accounts, they can only contribute a maximum of $5,000 in new money per year ($6,000 for those over age 50) to all their IRAs combined, subject to certain income requirements (see IRS Publication 590 for details on contribution limitations to IRAs.) They can roll over an unlimited amount from other IRA accounts into a self-directed IRA. If they want a higher contribution limit, they may consider establishing a self-directed SEP IRA account or solo 401(k) plan.
Of course, just because they have a self-directed gold IRA, they aren’t limited to physical gold. They can also invest their gold allocation in gold-linked securities, including gold mining stocks, ETFs and mutual funds.
Gold may be a good choice for those in businesses that are very cyclical, who are very closely tied to the stock or bond markets in other areas of their portfolio, who does not need to generate immediate income from that portion of his holdings, and who may be pessimistic about the U.S. or global economy.
Jim Hitt, CEO of American IRA-A National Provider of Self-Directed IRAs, cautions “We do not give investment advice. We share this article to give investors information on how gold investments work and, while these investments have been largely successful for our clients, we advise anyone thinking about this or any type of investment to meet with their financial advisor and/or financial professional before making any investment decisions. It is also critical for every investor to do their “due diligence” in researching investments before making any investment.”