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There are many reasons people invest in precious metals. Some hope for a quick return on investment, but increasingly, people are buying gold for retirement purposes. Since popularity doesn’t always equate to a smart investment, though, some are hesitant to take the leap.
This hesitancy is a good thing. Everyone should take time to put considerable thought into any investment they make. This is especially the case when you’re doing something as important as investing for retirement. Fortunately, there are many benefits to choosing gold for this endeavor.
At Silver Gold Bull, our goal is to ensure each of our clients has all the knowledge necessary to make informed investment decisions. Buying gold for retirement can be an excellent investment, but this is only the case if you go about it in the right way.
Is Gold a Good Investment for Retirement?
When considering options for retirement investing, the top consideration is return on investment. If you invested in the last video store on earth and it became successful, then investing in the last video store on earth was a smart move.
This raises the question of whether buying gold for retirement is a wise decision. This guide could go into detail explaining the answer, but Investopedia boiled it down to two simple sentences:
“Although the price of gold can be volatile in the short term, it has always maintained its value over the long term. Through the years, it has served as a hedge against inflation and the erosion of major currencies.”
It’s a fact that gold is a tremendous store of value. This has been the case for thousands of years. Few other assets can claim such a stellar reputation. And with so many options available when buying gold for retirement, it’s likely you’ll be able to create a solid strategy.
Of course, not all methods of retirement investing with gold are equal. Understanding this is a necessary task when making financial decisions.
Options for Buying Gold for Retirement
When you include precious metals in your retirement plan, you’ve got several options available. This can be as simple as buying gold coins to store in your safe, or you could go the digital route and invest in “paper gold.” Regardless of your decision, you’ll gain exposure to the yellow metal.
The following are some of the most popular methods when buying gold for retirement. It’s important to consider the pros and cons for each — and whether they work into your overall retirement plan.
Buying Physical Gold Bullion
Buying physical bullion is one of the most popular forms of investing for retirement. In fact, it’s one of the most popular options for any type of investing. This helps explain why the U.S. Mint recently could not meet consumer demand for gold coins.
There are countless benefits to buying physical bullion. The most important, though, is that you’re actually investing in gold. Other gold investment strategies — as you’ll soon learn — don’t give you actual gold and its many benefits. With physical bullion, you have direct access to gold.
Securing Shares of Paper Gold
Those looking for simplicity when buying gold for retirement often invest in exchange-traded funds (ETFs). These are funds that have baskets of other securities, and with gold ETFs, the goal is to track the price of the physical metal.
In many cases, this is exactly how it works out. If the price of gold goes up, it’s likely that gold mining stocks in an ETF will follow suit. And for ETFs whose underlying asset is physical gold bullion, it’s a near guarantee. Unfortunately, there are some drawbacks.
Most importantly, you’re never investing in actual gold. For instance, you cannot pull gold bars out of your safe if the market bottoms out. ETFs can also have large fees along with price fluctuations unrelated to the price of gold.
Investing in Gold IRAs
If you already have an IRA, you might wonder if buying gold for retirement with your account is possible. Unfortunately, you’ll often find that the answer is “no.” If you find a gold IRA, though, you can put money into gold and other precious metals to build a retirement nest egg.
Buying gold and adding it to an IRA was once a tedious process. Companies made efforts to simplify it, however, as increasing gold prices made demand rise. Of course, you’ll still need to find a broker or custodian for this type of investment.
Buying Gold for Retirement With a 401(k)
It would be great if you could invest in physical bullion with your 401(k). Unfortunately, very few plans offer this option. You’ll have difficulty finding any plan that allows direct investments into precious metals. Luckily, this doesn’t mean buying gold for retirement isn’t an option for you.
The best part is you won’t have to liquidate your retirement accounts to invest in gold. If you browse the fund descriptions of your 401(k) plan, you will probably find mutual funds that have high exposure to stocks directly linked to gold.
Many mutual funds invest in mining, production, exploration and even refining. And if your 401(k) plan has a brokerage option, you can similarly invest in ETFs and individual stocks with gold exposure. This makes buying gold for retirement with your 401(k) a simple process.
Avoid Gold for Retirement Scams
The concept of buying gold for retirement is nothing new. The idea’s increasing popularity over time has opened many investors’ eyes to the potential for such an investment. Unfortunately, increased attention to the strategy has also caught the eye of countless scammers.
There are certainly swindles out there that involve fake bullion. Unfortunately, crafty scammers have found a way to take advantage of folks even when selling genuine gold. And because they’re offering authentic bullion, many people don’t recognize the scam until it’s too late.
A single con carried out by just two men cost 1,600 people more than $185 million. The scam involved selling gold bullion at heavily inflated prices — occasionally 300 times higher than spot value. Scammers told a variety of stories to convince older Americans to pay inflated prices:
- An imminent stock market crash was on the horizon, and it would be worse than what we saw in 2008.
- Gold will soon climb to $3,000 per ounce, so there’s no risk in liquidating IRAs, 401(k) accounts and other investments.
- The government would swoop in and take funds out of retirement accounts if the economy went into recession.
Of course, no one can predict the first two scenarios described above. There’s no way to predict a stock market crash or gold reaching $3,000 per ounce with 100% accuracy. Additionally, the federal government doesn’t have standing to take IRA funds unless you have a tax levy or judgment.
If someone told you these events were coming and you believed them, buying gold for retirement would seem like the obvious answer. In fact, it would seem like the only safe thing to do. Even if any of these situations occur, though, you shouldn’t have to pay inflated prices.
There’s one rule you should always remember: the price of gold is the price of gold. While you’ll always pay a premium over spot price, it shouldn’t be anywhere close to 300% of spot. Take proper precautions when buying gold for retirement and only work with reputable dealers.
The Key to Buying Gold for Retirement: Diversification
As you come to the end of this guide, buying gold bullion for retirement might seem like the obvious answer. When you look at the performance of any investment, though, a more important lesson becomes apparent. That lesson? Diversification is key.
If you track the price of gold, you’ll see that it’s provided an excellent return over the years. For instance, an investment of $2,800 at the turn of the century would have been worth over $20,000 in August 2020. It’s hard to ignore such results, but there is no guarantee when investing.
If your savings plan includes buying gold for retirement — and many experts think it should — diversification can help protect your investment. If you diversify, fluctuations in any single asset won’t affect your entire portfolio. This can keep your finances strong while certain assets recover.
Start Buying Gold for Retirement Today
People save for retirement in a variety of ways. In fact, we currently have more options for savings than ever before. Technology has simplified building value for retirement. And with the availability of paper gold options, this is as true with precious metals as it is with anything else.
The principal lesson to take away from this guide is that you should inform yourself. Consider all your options when planning for retirement. And even if you find a route that seems like it’s the best for you, never overlook the value of diversification.
At Silver Gold Bull, we know that buying gold for retirement is a big deal. That’s why we created a massive knowledge base to supplement our gold and silver offerings. Visit our Precious Metals Blog today to find everything you need to make the best investment decision for you.