Is a Gold IRA for Seniors Smart for Your Retirement?
Gold IRAs are one of the many options seniors have when saving for retirement. Though they're similar to traditional IRAs, instead of investing in stocks and bonds, they allow you to invest in gold, silver, and other tangible assets.
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As you age — and especially once you near 65 — smart, low-risk investing gets more and more important. Not only does your retirement depend on it, but it also impacts the legacy you leave behind for your loved ones.
Gold IRAs are one of the many low-risk ways you can invest as a senior, offering an opportunity to both protect and grow your earnings. These unique retirement accounts allow you to purchase precious metals like gold, silver, platinum, and more, rather than traditional investments like stocks and bonds.
In this guide, we’ll dive deeper into the details of gold IRAs, as well as how they work and what they’re best used for. This guide is only a starting point. As with any investment, it’s important to weigh the pros and cons before signing up for a gold IRA. You should also speak with a financial advisor to ensure these accounts fit in with your overall investment or retirement plan.
In this guide:
- What is a gold IRA?
- How does a gold IRA for seniors work?
- Is a gold IRA the best investment for a senior citizen?
- Is there a better way to invest in gold as a senior?
- Is a gold IRA for seniors worth it?
- Where can seniors open a gold IRA account?
- Make sure to look out for gold IRA scams
What is a gold IRA?
A gold IRA is a type of Self-directed Individual Retirement Account used to hold gold, silver, and other precious metals. You can also purchase tangible investments with a gold IRA, including real estate, art, and more.
To open a self-directed gold IRA, you’ll first need an account custodian — a company or bank approved by the IRA to manage these accounts and handle all the paperwork. Once your account is open and funded, you’ll choose the metals you wish to purchase (and the dealer you want to buy them from). Once you’ve selected your metals and dealer, you can direct your custodian to buy the metals using the funds in your account.
After you’ve purchased your metals, they’ll need to be transported and held in an IRS-approved depository — not a home safe or a personal deposit box. Your IRA custodian should be able to recommend an approved depository you can use.
Companies Offering Gold IRA Accounts
The fees for a gold IRA will vary by custodian and depository. You may have account set-up fees, storage fees, annual management fees, and even extra fees and taxes when buying your coins and bullion. Make sure you compare at least a few vendors and custodians if you want to get the best deal.
Funding your gold IRA
Putting funds in your IRA can be done in several ways. First, you can rollover funds from an existing retirement account. You’ll just put this request in with your current 401k or IRA provider, and they’ll transfer the funds to your new account.
You can also withdraw funds from your current 401k or IRA and put them into the gold IRA account directly. Keep in mind you’ll need to deposit the funds within 60 days to avoid early withdrawal penalties.
You can also fund your account using cash or a wire transfer. Remember that there are annual contribution limits, though. With a gold IRA, you can’t contribute more than $7,000 per year once you’re age 50 or older (the limit is $6,000 if you’re younger than that). Contributing beyond these limits would mean a penalty of 6% on the excess contributions.
Accessing your cash
Gold IRAs work just like traditional IRAs. You can start taking distributions from the account once you reach 59.5 years of age. If you try to withdraw before this point, you’ll owe a 10% penalty on the distribution amount. Once you get to 72 years of age, you’ll need to take your required minimum distributions, as per IRS rules.
Types of investments that can be held in a gold IRA
Despite the name, you can actually hold a variety of assets in a gold IRA. These, of course, include metals like gold, platinum, silver, and palladium, but there are other options, too. You can also invest in art, real estate, antiques, stamps, gems, and other collectibles.
If you opt to purchase precious metals with your account, you’ll need to be careful about which types you buy. Only certain coins, bars, and bullion meet the IRS’s standards for quality (your metals dealer should be able to point you toward currently approved ones). Any metals not on this list are not eligible for purchase through a gold IRA.
To learn more, check out our guide on how to hold physical gold in an IRA.
As you can see, gold IRAs are a little complicated. If you’re considering using one to purchase gold, silver, or other physical investments, keep reading to learn more about these accounts below.
How does a gold IRA for seniors work?
For seniors, gold IRAs work much as they do for younger investors. The only difference? You can contribute more annually. As a senior — or anyone over the age of 50, you can contribute $1,000 more than those on the younger end.
As long as you turned 70.5 in 2020 or later, you can continue your contributions as long as you like. According to a recent Gallup poll, 63% of people plan to keep working — at least part-time — after retirement. If you’re one of the many in this boat, contributing to a gold IRA in those years could be a smart place to grow and safeguard your money.
Keep in mind: Though you can technically start taking distributions as soon as you turn 59.5 (without a penalty), you don’t have to. If you’re hoping to sit on your investment, you have until age 72 to let your metals grow in value. That’s when you’re required to start taking contributions under IRS rules.
Many seniors are waiting until their older years to start taking withdrawals, allowing them to grow their investments as much as possible before dipping into those funds. According to the Employee Benefit Research Institute, consumers over 70 accounted for the largest percentage of IRA withdrawal activity in 2017 — and 25% of those took out more than their required minimum. Consumers under the age of 60 accounted for just 9% of all distributions for the year.
To learn more, you can check out our guide to how gold IRAs work.
Is a gold IRA the best investment for a senior citizen?
As you age, safer, more stable investments tend to be the best place to store your money. Though your earnings on those investments may be less, this approach significantly lessens the risk of hurting your retirement plans. After all, if you’re one year out from retiring, there’s not much time to build those savings back up if they’re lost on the stock market or due to market fluctuations.
Fortunately, gold and other precious metals tend to be a pretty steady investment. Let’s take a look at gold and other low-risk investments you should be focusing on as a senior:
- Gold and silver: Gold prices have held firm in recent years. In 2009, the average price per ounce was just under $1,000. Now, it’s over $1,700. Silver, on the other hand, is down from its 2010–2012 peak — but it’s still strong historically speaking. In the early 2000s, silver went for just a few dollars an ounce. Now it’s well over $26.
- Real estate: Real estate can be a great way to build long-term wealth, especially with home prices rising lately. If you have rental properties, it can also provide passive income, which can be extremely helpful in retirement.
- Bonds: Municipal bonds are low-risk investments that still allow you to grow your cash at a slow and steady rate. Treasury bonds are a good option, too, but they have much longer maturity rates (Treasury notes may be the better option here).
Data sourced from macrotrends.net
Everyone’s retirement plans and financial pictures are different, so take this guide with a grain of salt and remember that past performance is not an indicator of future performance. Consider speaking to a financial advisor for the most personalized advice regarding your investments.
Is there a better way to invest in gold as a senior?
Gold can be a safe and low-risk way to invest your money, especially as you near retirement. But it does have its downsides. For one, you’ll be taking money from other, potentially higher-yield investments. Investing $1,000 in the stock market, for example, may net you much more cash than that same amount spent on gold bullion.
There are also all the fees that gold IRAs come with. Fortunately, if you do choose to invest in gold, an IRA isn’t your only option. You can also employ one of these other methods below:
Buying gold and storing it at home
You can, of course, buy gold bars and other metals and store them at home in a safe or at a safety deposit box. If you go this route, make sure you insure your purchases.
This approach can be a suitable investment method if you’re looking for something easy, hassle-free, and tangible. Physical gold investments can also easily be passed down, and there aren’t all the fees and storage costs that come with a gold IRA.
Investing in gold funds and ETFs
There are lots of mutual funds and exchange-traded funds that focus on gold and precious metals, and these offer a break from all those IRA-related fees and costs as well. Some of these invest in actual metals and bullion, while others buy stock in companies involved in the gold mining or refining processes. (You can also invest in these stocks directly if you prefer).
The former is a higher-risk endeavor, as it depends on how each company performs over time and a host of environmental factors. Still, with higher risk does come higher potential reward.
Buying gold futures
Gold futures give you the right to buy gold for a set price at a later time. These require accurately speculating the future price of these metals and are best left to seasoned investors. You’ll also want to be comfortable with higher risk if you go this route.
Generally speaking, riskier investments like futures aren’t advised as you get older and closer to retirement.
Is a gold IRA for seniors worth it?
If you’re looking to invest your funds in a safe, low-risk way, gold IRAs can be a great way to do it. Not only can they protect your retirement savings from market swings seen with stocks and other common investments, but they can offer the chance at a slow and steady growth, too.
Gold IRAs are also a smart tool for diversifying your existing retirement portfolio. By investing in a gold IRA, you’re spreading your money out. Should the stock market turn or savings rates drop further, your entire retirement won’t be negatively impacted (just a part of it).
Finally, gold investments can also hedge against inflation — a growing concern as the economy recovers from the coronavirus pandemic.
Where can seniors open a gold IRA account?
If you’re a senior looking to open a new gold IRA account, it’s important to compare your options. To get started, you can consider some of the companies below.
Compare Gold IRA Companies
Make sure to look out for gold IRA scams
If you do opt to open a gold IRA account, watch out for scams as you go through the process. Scams are quite common in this industry, and they could put your money — and entire retirement – at risk.
Here are the most common signs of a scam you should watch for:
- Mentions of rare or collectible coins, as these are unlikely to meet IRS approval
- Fake IRAs, where the company takes your funds and uses them for their own purchases rather than putting them in an IRA account
- Misleading contracts, which often contain a myriad of fees and limitations
- “Store at home” IRAs, which tout storing your IRA-purchased gold at home rather than in an approved depository (learn more: Why you shouldn’t setup a home storage gold IRA)
There may be other scams as well, so be mindful and ask questions if something looks suspicious. To compare several options, you can check out our guide to finding the best gold IRA company.
As mentioned earlier, consulting with a financial advisor is wise, as they can ensure you’re not only working with a reputable company but making the right moves for your finances and long-term retirement goals.
Author: Aly Yale