Investing in an individual retirement account (IRA) is a great way to boost your savings and reduce your taxes as you prepare for life after work. And with gold having a moment in recent months, you may have heard of a lesser-known type of IRA known as a gold IRA.
Gold IRAs work the same as regular IRAs, but instead of traditional assets like stocks and bonds, they invest in gold and other precious metals. This allows you to enjoy the benefits of an IRA as well as the unique advantages gold offers.
A gold IRA can be a smart investment at any time. But there are some circumstances when it can be particularly advantageous.
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6 great times to open a gold IRA
Here are some instances when a gold IRA is especially worth considering.
When you want tax advantages
One of the main reasons to consider a gold IRA is the tax benefits it offers. Depending on the type of gold IRA you choose, you’ll enjoy these benefits either now or in retirement.
With a traditional gold IRA, contributions are pre-tax and withdrawals are taxed when you take them. Contributions are also tax-deductible. With a Roth gold IRA, contributions are taxed and withdrawals are not. By considering your current income and expected retirement income, you can choose the option that will reduce your tax burden the most.
During economic uncertainty
During times of economic turbulence, investors tend to move their money to lower-risk assets such as gold. Gold is often seen as a safe havenbecause it provides steady, reliable returns despite market fluctuations and geopolitical instability that can wreak havoc on other assets.
When the stock market is shaky
The stock market can be unpredictable, and investors can see their portfolios’ value drop drastically overnight. Gold has a negative correlation with stocks, meaning its value tends to increase as stocks decrease. This can make a gold IRA a great way to protect your portfolio from losses and enable you to hold onto more of your hard-earned investing dollars.
When inflation is rising
Inflation can erode the value of your portfolio, leaving you with less money to rely on in retirement. History has shown gold to be an excellent hedge against inflation, holding its value — if not increasing in price — as the dollar loses purchasing power. As a result, investing in a gold IRA can be a smart way to preserve your wealth when inflation is on the rise.
When you want to diversify your portfolio
Diversification is a key principle of investing. When you diversify your portfolio, you invest in a mix of assets with varying levels of risk and growth potential. This allows you to maximize your earnings while minimizing your losses. Gold can provide a valuable counterpoint for more volatile assets like stocks, helping you achieve that balance.
When gold prices are low
Over the long term, gold prices tend to hold steady. However, they can fluctuate in the short term. If we’re in a period where prices are low, it’s an ideal time to add a gold IRA to your portfolio so you can reap the benefits when prices go back up.
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The bottom line
Thanks to gold’s steady prices and long-term stability, opening a gold IRA can be a wise move at any time. However, it can be especially beneficial in the times listed above.
Ultimately, as with any investment, the best course of action is to do your research, consider your financial situation and investment goals and speak with a financial advisor who can help you make an informed decision.