In 1970, the cost of an ounce of gold was $37. Today, it’s well into the thousands—and may be headed to $2,000 before long. So why have precious metals—typically seen as a hedge against inflation and economic collapse—been relegated to second-class status by so many investors? It may be because they are not using gold or silver properly within a retirement plan. And that begins with a Self-Directed Precious Metals IRA.
Investing in precious metals with a retirement account is certainly a possibility for anyone who wants to open their portfolio to a broader, more diversified strategy. But that does not mean that investors should invest blindly in precious metals, either. Here’s what you will need to know if you’re considering these investments in a retirement account:
Why Own Gold or Silver in a Self-Directed Precious Metals IRA?
Gold and silver are not like most investments. They will sit in a safe and do nothing. They will not generate dividends. They will not pay you rent. They will just sit there, holding on to their value. So why might someone consider something like gold or silver as part of a retirement investment strategy? Here are a few of the reasons:
- Some people consider inflation to be a “hidden tax.” Like rust, it can wear away at the value of your investments over time, even if you have invested well. Inflation is out of your control. But you can prepare for rampant inflation by investing in precious metals that tend to hold on to their value, even as the value of paper money decreases. Keep in mind that because gold is priced in dollars, a weaker dollar will mean that the value of gold will increase relative to the currency. This means that the money you invest in gold remains strong, even during periods of inflation.
- There’s no denying that precious metals are an entirely different asset class than real estate, stocks, and bonds. Even keeping a small portion of your portfolio in precious metals can help you create an “all-weather” portfolio that reduces your overall risk and keeps you feeling secure even when the economic situation is dire.
- Because gold and silver are tangible assets that you can keep secure, it helps separate the rest of your portfolio from the ups and downs of Wall Street. Owning physical gold and silver can mean feeling happy about your decisions even on days where market drops make the headlines. This gives you the confidence you need to continue investing where others are wondering if they should sell at a loss.
Holding Gold or Silver in a Self-Directed Precious Metals IRA
At our Precious Metals IRA guide, you will see that there are a few limits to the way you can hold precious metals in a retirement account. You should avoid holding the precious metals personally when holding them in a retirement account, instead selecting an insured, approved depository. If you want to hold precious metals personally, you can buy them on your own—but you should avoid holding them within an IRA.
Stick to mainstream physical gold and silver investments, such as gold coins and bars hallmarked by a NYMEX or COMEX-approved refiner/assayer. Stick to highly pure gold and silver for your retirement investments.
If you do it right, you may watch the value of your gold and silver accelerate while the metals remain in a tax-protected retirement account. This helps you build a portfolio that can give you a greater amount of confidence than one that relies too heavily on any one asset class.