self directed IRA

The Pros and Cons of Investing Gold in a Self Directed IRA

Gold is one of the most popular investment options out there, and for good reason. It’s widely recognized as an effective hedge against inflation, and many people see it as a safeguard against recessions. And with a self directed IRA, you can even invest in the power of gold without needing a physical place in your home to protect it.

But as with most things, even gold investments have their pros and cons. Although gold seems to be going up in value perpetually, it doesn’t yield interest. It can also be a magnet for thieves and fraudsters.

If you’re considering investing in gold with an IRA, then this article is for you. Keep reading to learn all about the pros and cons of investing gold in an IRA.

Pros of Investing Gold in a Self Directed IRA

There’s a reason why you hear so many financial advisors tell you to invest in gold. Here are the top reasons why you should.

Enjoy Tax Benefits Exclusive to Individual Retirement Accounts

If you’re familiar with the concept of individual retirement accounts (IRAs), then you know that you take advantage of certain tax benefits when you invest with one. Like a traditional IRA, a gold IRA provides similar tax incentives.

Depending on the type of IRA you have, you may not have to pay taxes on the income that you invest into it. Or you may pay taxes on the income you invest, but when you withdraw your investment at retirement age, you won’t have to pay taxes on it then.

As long as you don’t liquidate your portfolio before reaching retirement age, an IRA is one of the best ways to prepare for retirement.

Have Full Control Over Your Portfolio and Investments

With a standard IRA account, you’re limited to using either fiat currency or paper stocks and bonds. Stocks and bonds can be a great idea as long as you choose good places to invest your money, but fiat currency will inevitably depreciate by the time you retire.

However, one thing you can’t do with a standard IRA is invest in precious metals. That’s something that sets gold IRAs apart.

Being able to invest in precious metals lets you diversify your portfolio. It also gives you greater control over your wealth as it grows. Both are very good reasons for opening a gold IRA.

Enjoy a Uniquely Secure Portfolio With a Strong Asset

Perhaps the most important factor investors consider when they open an account is the security of their assets. Many people see fiat currency as a poor store of value because its value almost always goes down. Similarly, the money you invest in stocks could disappear overnight if the companies you bet on go under.

Compared to these modern stores of value, gold is much more likely to maintain its worth over time. It’s been trusted as a store of value and a unit of exchange for thousands of years. And in the modern world, gold has been increasing in value steadily for as long as most people can remember.

These are the primary reasons why investing gold in your IRA is a good idea to consider. Next let’s look at some reasons you might want to avoid a gold IRA, or at least not rely on one entirely.

Cons of Investing Gold in a Self Directed IRA

Not all IRA investments are created equal, and investing in gold may not be best for everyone. Keep reading to learn about the cons of investing gold in your IRA.

Miss Out on Interest, Dividends, and Yields

This is perhaps the most disappointing part of using gold as an investment choice. Unlike paper-backed assets, you won’t earn dividends, interest, or yields on gold you buy. Instead, you’re stuck waiting for your gold to increase in value on its own as global inflation continues.

Because of this, you may not earn as much money as fast with gold as you would with stocks. But on the other hand, stocks and bonds are a much riskier investment choice. While they have the potential to increase in value dramatically, they can also lose their value overnight.

Face Certain Fees and Expenses

IRA account fees vary depending on the trust you choose to invest with, but there tends to be a bigger expense involved when you invest in gold. Any IRA may charge a one-time initiation fee, but a gold IRA may charge annual storage and custodian fees as well. This is because the gold you buy has to be stored in a physical location—ideally one with tight security.

Risk Potential Theft and Fraud

Although this is a fairly small risk if you invest with a reputable company, anytime you invest in physical assets like gold, there’s a chance it could be stolen.

To mitigate this risk, make sure that any gold IRA you open has a depository that’s fully insured. You should also make sure the custodian you work with insures each financial transaction that you make.

Learn How to Invest Gold in a Self Directed IRA

As you can see, investing gold in a self directed IRA has its upsides and downsides. But many investors will agree that, when it comes to gold, the advantages far outweigh the risks. And since gold continues to go up in price, there will never be a better time than right now to get started.

Keep reading our blog to learn everything you need to know about investing in precious metals through an IRA.

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