Gold Individual Retirement Arrangement is a common term for self-directed IRAs. Self-directed IRAs, as the name implies, offers more flexibility for the account holder to diversify investments. Mainly, it allows people to add precious metals to their accounts, unlike with regular IRAs. Self-directed IRAs are not solely managed; you still need to appoint a trustee. In the past, Gold IRAs were only preferred by dedicated investors because they involve more paperwork and contributions than the average IRA. However, Gold IRAs have spiked in popularity following the 2008 financial crisis. In fact, everyone must consider getting a Gold IRA. Read ahead to find out why:
Gold will Never Value at Zero
Your IRA includes investments. And investments inherently are risky. Cash assets like stocks and bonds could lose value dramatically. Stocks can be reduced to zero value, as it did with Lehmann Brothers stocks in 2009. Even government bonds are highly risky and can lose value, as it did with Argentina and Greece in the past few years. In the case of an economic recession or a depression, your cash assets could lose value until you are left with nothing. Gold, on the other hand, is an asset that can never be valued at zero.
Gold has over 5,000 years of history as a currency and a trading asset. Even if gold in not used as currency, it is valuable as a metal. Gold, the metal, is used popularly in jewelry, and it is also significantly used industrially for electric circuitry in things like computer chips. Mathematically speaking, this makes it impossible for gold to lose all value like stocks. That’s why gold is always a good asset to have, especially when you are saving long term with an IRA.
Provide a Hedge for Your Cash Assets
The unique nature of gold makes how it is valued quite unique as well. The dollar and gold share an inversely proportional relationship value wise. When the dollar is highly valued, the value of gold is low and volatile. However, when the dollar is down, the value of gold soars up. Meaning, gold is the perfect asset to protect cash assets. For example, in 2008, investors with gold protected most of their wealth. As stock values plunged down to near zero, gold prices soared, thus hedging against the loss of value of cash assets for those who owned physical gold. If you get a Gold IRA now, the physical gold will act similarly with your cash assets. All in all, you can ensure your wealth is protected against another possible recession in the decades coming up to your retirement.
Setting Up a Gold IRA
You will need to make a certain amount of contributions to your regular IRA before you can convert it to a self-directed IRA and appoint a trustee. You do need to buy physical gold yourself through a dealer. You can check out reputable sites like LearCapital.com to find good deals. Online gold dealings are rife with scams, so seek real registered businesses like Lear Capital to get your metal. Once you have the metal, the trustee for your IRA will store the gold.
Gold IRAs are a necessity that will hedge against your cash assets so you do not lose everything. Therefore, seriously consider converting your IRA to a self-directed one today.