When studies show that more than half of Americans have less than $1,000 in their savings accounts, it would tend to indicate that a retirement crisis is brewing. It doesn’t have to be this way for many people because there is time to save in a retirement account like an IRA.
Different Types Of IRAs
When it comes to saving directly in an IRA, there are two primary options. The first is a traditional IRA, and the second is the Roth IRA. Another IRA that will sometimes get mentioned in retirement planning blogs and articles is the rollover IRA. This is set up with money that you’d roll over from a 401(k) plan if you leave a company. However, the rollover IRA would need to go into a traditional or a Roth account.
How Does An IRA Work?
Both traditional and Roth IRAs get tax-advantaged treatment. The main difference is related to when you pay your taxes. Both provide tax-free growth for any money that’s left in the accounts. This could shelter you from huge capital gains and dividend taxes for decades. With a traditional IRA, you’ll get to deduct your savings from your current taxable income on a dollar-for-dollar basis.
If you have a 22% marginal tax rate, you’d be able to save more than $1,300 on your tax bill by hitting the $6,000 contribution limit for 2020. However, you’d need to pay the taxes on any withdrawals you make when you hit the specified retirement age of 59 1/2. With few exceptions, when you take money out of an IRA before that age, you’ll also owe a 10% penalty. With a Roth IRA, you’re taxed when you put the money in. Therefore, the government will allow you to take tax-free withdrawals as long as you’ve hit the required retirement age.
How To Put Physical Gold In Your Account
Most people will invest in stocks and bonds in their IRA accounts. In fact, if you use a traditional brokerage like Schwab or Vanguard, you’ll be limited to these investment vehicles. What if you want to invest in gold in your IRA? You’ll have to choose a plan that allows for a self-directed IRA. With self-directed plans, you can invest in just about anything. You can save physical gold or other precious metals in these accounts.
Pros Of A Gold IRA
While you might not want to put all of your IRA funds into physical gold, there can be a place for gold in your portfolio. There are a few major benefits. First, gold is a hedge against inflation. It tends to maintain its value in relation to other forms of currency. Goldco states, “Your gold is stored securely, it can’t be hacked, and it won’t lose value when the bottom falls out of stock markets.” The question is, what is a gold IRA investment worth at a given time? Simply stated, your physical gold or any precious metals funds that you own will be worth the prevailing market value.
Investing in gold can help you weather the volatility of the stock market. It has a track record that reaches back millennia, and people are likely to continue to value it well into the future.