People buy gold as an insurance policy or when they worry about the economy. It’s a simple asset that helps protect your wealth from a constant stream of threats that can reduce your purchasing power in retirement. Is buying gold for retirement the right option for you?
If you have an IRA you can actually add physical gold to your portfolio. Gold stocks and paper assets are always options, but owning physical gold bullion offers something different since it’s tangible asset you can hold onto.
Gold becomes a safe haven when the world is uncertain. With events like the Russia-Ukraine conflict and concerns about inflation, many investors want the reliability of something real, like gold. Being able to add gold and other precious metals to your retirement account and still get all the perks of traditional IRAs can be a great path for your financial future.
In this article, we’ll cover exactly why buying gold for retirement can be a smart strategy and what steps to take to get started.
Is buying gold for retirement a good investment?
A solid retirement plan means owning stable, long-term investments, and gold is one of the most reliable options. Most of the investors we work with choose to invest in gold for reasons like:
1. Diversification
Many people look at gold as a way to diversify their savings beyond traditional paper assets. Physical gold bullion isn’t directly tied to other investments. So, while real estate might slump, the stock market drops, or crypto crashes, gold holds steady and may even rise in value.
Gold isn’t necessarily something you buy for a return but rather something you buy to preserve your wealth. Even so, the chart from Predictive Advisor Magazine shows gold’s return over the past 53 years and how it outperforms cash, Treasurys, and other commodities:
2. Inflation hedge
Gold is a way to put a “barrier” around your money. It acts as an inflation hedge to keep your money from losing value when prices go up. Consider how we recently saw inflation rates of 8% in 2022, and the price of gold was around $1800/oz.
Now that inflation rates and inflation are lower, gold recently hit $2700/oz. Note that gold prices also depend on investor sentiment, and right now, there’s a lot of uncertainty about the overall economy.
In the Reddit r/Gold forum, user My-Cousin-Bobby shared their thoughts about gold for inflation protection:
“I am by no means a gold bug, but the reason that gold/silver/commodities get tagged as an ‘inflation hedge’ is because they’re deprived of other types of risks you’d encounter in the market. Pure commodities don’t have business operation or credit risk… it’s pretty much entirely currency risk (I guess you could technically say it has some level of market risk and/or liquidity risk).
So, yes, the stock market is essentially a hedge against inflation as well, but commods remove a lot of the other risks you would encounter, making it more of a “pure” inflation hedge.”
3. Wealth preservation
Gold can help protect your wealth by holding its value over time, even when other investments like stocks lose value. It’s a physical asset not impacted by inflation or economic troubles. And, when things are in chaos, people rely on gold because it tends to keep its value.
Gold is a defense strategy to protect against uncertainty. In fact, we discussed current issues and the impact for gold during our recent podcast:
4. Tangible asset
One of the most common reasons for owning gold is to have a physical asset that you control. If you invest in the stock market, you only have paper assets, and you have zero control over the value of that stock. But with gold, it’s different. If you invest in gold, you own it and no matter what the markets do, it’s yours to keep.
5. No cyber risk
It seems like almost every day, we see headlines of a cyber attack, data breach, or even a mistake like the recent Crowdstrike outage, which caused major havoc with the airlines. The great benefit of gold is that it doesn’t depend on online systems, can’t be hacked, and can’t suddenly disappear due to a technical failure.
Types of gold investments for retirement
If you decide to buy gold, here are the ways you can do this inside of retirement accounts:
Physical gold
Physical gold comes in bullion, coins, and bars and you can hold it inside of an individual retirement account (IRA). To set up a Gold IRA, you’ll work with a self-directed IRA custodian to administer the account, follow IRS rules, and store the gold on your behalf.
You can fund your account with a 401(k) rollover, IRA rollover or directly with other money that you have available. All of the same rules apply for accessing your funds at retirement age, tax benefits and required minimum distributions per IRS regulations.
A reader on the popular Bogleheads subreddit nailed gold’s portfolio value:
“The best argument to hold gold is that its returns are historically uncorrelated with both stocks and bonds, which, when held together, can lower portfolio volatility and improve safe withdrawal rates in drawdown phase.”
Gold ETFs and gold mutual funds
These gold funds are paper assets and trade on stock exchanges. You can usually buy these through a traditional IRA. Some investors like this route since paper assets are easier to sell and they don’t have to worry about storage of physical gold.
Steps to buy gold for retirement
To add gold or precious metals to your retirement plans, decide if you want to own physical gold or invest in paper assets like a gold ETF. For gold market paper investments, ask your broker to allocate a portion of your portfolio to this asset class.
If you decide to buy physical gold, the steps are:
Choose a reputable dealer: Thousands of investors choose Swiss America because we’ve been in business for decades, have excellent customer reviews, and are committed to providing education and resources.
Open a Gold IRA (optional): If you want to use retirement funds to buy gold, you can set up a self-directed IRA with a precious metals custodian. Custodians handle all the day-to-day management of Gold IRAs and buy gold bars or coins on your behalf.
Make the purchase: Buy the gold through your dealer or through your Gold IRA custodian. Our team can provide guidance here because the IRS has rules about what gold or other precious metals you can add to your investment portfolio.
Store your gold: If you are buying gold inside an IRA, your custodian arranges for secure storage at an IRS-approved depository. If you are buying outside of a special-purpose retirement account, store your gold in a secure location. Most investors use a home safe, bank safety deposit box, or professional vault.
Monitor your investment: You can use Swiss America’s online portal to track of the value of gold over time and adjust your retirement strategy as needed.
Gold investment for retirement
Buying gold or any other precious metal for retirement can help you hedge your bets against an uncertain future. If you want to learn more about how to invest in gold, contact us today for helpful advice to help you meet your financial goals.
Buying gold for retirement: FAQs
Is gold a better investment than a 401k?
Gold and a 401(k) serve different purposes in a retirement portfolio. A 401(k) offers tax advantages and employer matching. Gold provides stability and acts as a hedge against inflation and market volatility. It’s a good idea to have both as part of your retirement savings strategy.
How much gold is enough for retirement?
The amount of gold you should have in your portfolio depends on your overall investment strategy and financial goals. Experts usually recommend allocating 5-15% of your portfolio to gold and other precious metals.
What are the disadvantages of investing in gold?
Gold has drawbacks like any investment. For example, you might need to sell it and not get the price you want or it might take a while to sell. You’ll also have to consider storage costs in your return calculations.
Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
