Hey, everyone. Welcome in. We're driving deep
today into a topic that I know a lot of you have
been curious about, gold IRAs. Yeah, it seems
like they've been getting more attention lately.
Definitely. And that makes sense, right? I mean,
for a lot of folks, gold has this almost mythical
quality to it. It's tangible. It's historic.
It just feels different from stocks or bonds.
It's interesting, isn't it, how gold Holds that
kind of appeal and I think that's part of what
draws people to the idea of a gold IRA This sense
that they're holding something real something
that stood the test of time Absolutely, and that's
exactly what we're gonna unpack today We've got
a ton of great material articles research reports
all sorts of stuff and we're gonna break it all
down for you The goal is to help you understand
not just the potential benefits of gold IRA But
more importantly the risks that you really need
to be aware of yeah, I think that's key because
Like any investment, there's more to the story
than just the initial appeal. We're talking about
things like the stability of gold prices, the
fees involved, the tax implications. Right, exactly.
So let's start with the basics. What is it about
a gold IRA that makes it attractive to investors
in the first place? What are those core selling
points that really draw people in? Well, I think
a lot of times it boils down to three main things.
First, you've got diversification. Now, this
isn't just about having different stocks in your
portfolio. It's about holding assets that don't
necessarily move in the same direction. Right.
So not putting all your eggs in one basket as
the saying goes. Exactly. And gold historically
has often shown a tendency to do the opposite
of what the stock market does. Like back during
the 2008 financial crisis when so many stock
values were plummeting, gold actually held pretty
steady and even increased in value for a while.
So it's kind of like a counterbalance, potentially.
OK, so it's about creating a bit of a buffer,
a hedge against those big market swings. That's
the idea. Then the second big selling point that
you hear a lot about is inflation protection.
Right. This idea that gold is a good hedge against
inflation, a way to try and preserve your purchasing
power when everything else seems to be getting
more expensive. Exactly. The classic argument
is that as the value of paper money declines,
the value of a tangible asset like gold tends
to go up. Of course, it's important to remember
that this relationship isn't always perfect,
but the core idea is that gold holds its value
over the long haul. And then of course, there's
that third element of appeal, that sense of security
that comes from owning something physical, something
you can actually touch and hold. That's a big
one for a lot of people. It's different, right?
It's not just numbers on a screen or a piece
of paper. It's a tangible asset. And that can
be really comforting for some investors, especially
during times of economic uncertainty. OK, so
we've got diversification, inflation protection,
and tangibility. Those are some pretty compelling
reasons to at least consider a gold IRA. But
like you said earlier, there's more to the story,
right? Let's talk about the potential downsides.
One of the first things that jumps out from the
research we've been looking at is the volatility
of gold prices. Even with this image of stability,
the price of gold can actually fluctuate quite
a bit, can't it? Yeah, I can definitely move
around. It's important to remember that gold
is still a commodity. It's traded on global markets,
and those markets are influenced by all sorts
of factors. We tend to think of gold as this
safe haven, and it can be, but it's not immune
to ups and downs. Can you give some examples
of those ups and downs, some concrete moments
in history that illustrate this point? Sure.
We were just talking about the 2008 financial
crisis when gold prices did really well. But
if you go back to the early 1980s, gold had this
big run up in price and then it crashed pretty
hard. So it's not always a straight lineup. It
can be unpredictable. So what are some of the
things that drive those price swings? What are
those all sorts of factors that you mentioned?
One of the biggest ones is global economic stability.
When economies around the world are doing well,
there's less of a need for safe haven assets
like gold. So demand goes down and prices tend
to follow. But when things start to get shaky
like during a recession or a pandemic like the
COVID -19 pandemic, gold tends to look more attractive
and that can push prices up. Makes sense. So
economic uncertainty can be good for gold. Yeah,
to a certain extent. But it's not just about
the overall economy. Central bank policies play
a huge role, too. When central banks like the
Federal Reserve in the U .S. decide to increase
their gold reserves, their purchases can really
move the market. Same thing if they decide to
sell. So keeping an eye on what central banks
are doing is something to consider. That's an
interesting point, something I hadn't really
thought about before. What else should investors
be aware of? Well, geopolitical events can also
have a big impact. Things like wars, political
instability, major trade disputes, those kinds
of things can all create uncertainty and make
investors nervous. And when investors get nervous,
they often turn to gold as a safe haven, and
that can drive up prices. So if you're thinking
about investing in a gold IRA, it's not just
about the price of gold on any given day. It's
about understanding these bigger economic and
geopolitical forces that can influence those
prices over time. Absolutely. It's about taking
a long -term view and recognizing that there
will be fluctuations. Okay, so let's say you've
weighed all those factors and you're still thinking
about a gold IRA. What else do you need to be
aware of? Let's talk about the costs involved.
I know this is a big one for a lot of people.
It is. And it's important to understand that
the cost of a gold IRA go beyond just the price
of gold itself. There are other expenses to consider.
For example, storage fees. Right, because you
can't just keep the gold at home under your mattress,
can you? Not if you want your gold IRA to maintain
its tax advantage status. The IRS has strict
rules about this. The gold has to be stored in
an approved depository, and those depositories
charge fees for their services. You're looking
at anywhere from, say, $50 to $300 per year,
depending on how much gold you're storing. OK,
so that's one cost. What else? Then there's insurance.
You've got this valuable asset. You want to protect
it. Insurance costs can vary. But you're probably
looking at something like half a percent to 1
% of the total value of your gold each year.
So if you've got $100 ,000 worth of gold, that
could be $500 to $1 ,000 in insurance premiums
annually. And I'm guessing there are management
fees, too, right? Someone has to administer this
account. Right. You'll have management and administrative
fees to cover the costs of maintaining your account,
all the paperwork, that sort of thing. Those
fees can range from, I'd say, $75 to $300 per
year, again, depending on the company you're
working with. OK, so we've got storage fees,
insurance, management fees, all things to factor
in. Are there any other potential costs that
people should be aware of? There can be. Some
companies might charge additional fees for specific
things like wire transfers, account setup, or
even closing the account down the road. It's
really important to read the fine print and make
sure you understand all the fees involved before
you sign on the dotted line. Okay, good advice.
Now let's talk about taxes. I know this can be
a little confusing with IRAs in general, so let's
try to break it down for gold IRAs specifically.
What are the tax advantages and what are some
of the things that people need to be careful
about? One of the main advantages of gold IRA
from a tax perspective is that it's tax deferred.
This means that any profits or gains your gold
investments generate inside the IRA aren't taxed
until you withdraw the money in retirement. OK,
so it's kind of like a traditional IRA or a 401k
in that sense. Exactly. You're not paying taxes
on those gains year after year. It's all deferred.
until later. And that can potentially allow your
investment to grow more quickly because you're
not losing a chunk of it to taxes along the way.
But here's the catch. When you do eventually
withdraw that money in retirement, it's taxed
as ordinary income. So the tax isn't avoided.
It's just delayed. OK, got it. So what about
required minimum distributions? those RMDs that
you have to start taking from traditional IRAs
and 401Ks when you reach a certain age. Do those
apply to gold IRAs as well? They do. Once you
turn 73, you'll need to start taking those minimum
distributions from your gold IRA. And if you
don't, there can be pretty hefty penalties. So
it's important to be aware of that and factor
it into your retirement planning. And what about
those penalties? Can you give us an idea of what
we're talking about here? Sure. If you withdraw
money from your gold IRA before you reach the
age of 59 and a half, you're usually going to
get hit with a 10 % penalty on top of your regular
income tax rate. And with those required minimum
distributions, if you don't take out the required
amount after age 73, you could be looking at
a penalty of 25 % on the amount you should have
withdrawn. So it's not something to mess around
with. Definitely not. Now, what the other potential
risks that came up in our research is the idea
of leveraging investments essentially, borrowing
money to invest in gold. Can you explain how
that works and what the potential downsides are?
Sure. Leveraging in the context of a gold IRA
basically means using borrowed funds to buy more
gold than you could with just your own cash.
The idea is that if the price of gold goes up,
your profits are magnified because you control
a larger amount of gold. But of course, the opposite
is also true. If the price of gold goes down,
your losses are magnified. And either way, you
still have to repay the loan. So it's a very
risky strategy. So you could end up owing more
than the gold is worth if the market goes against
you. Absolutely. And that can be a really dangerous
situation to be in, especially when you're talking
about your retirement savings. It's definitely
not a strategy for everyone, and it requires
a lot of careful consideration and a really good
understanding of the risks involved. Absolutely.
OK, so let's talk about choosing the right company
to work with a company that can help you set
up and manage your gold IRA. What are some of
the key factors that people should be looking
for? The most important thing is to find a company
that's reputable and trustworthy. You're entrusting
them with a significant amount of your money,
so you want to make sure they have a solid track
record and a good reputation. Look for online
reviews, check with the Better Business Bureau,
that sort of thing. You also want to make sure
they use a reputable custodian to store your
gold. The custodian is the company that actually
holds the physical gold, so you want to make
sure they're secure and reliable. Right. And
what about those fees we talked about earlier?
How do those factor into the decision -making
process? You definitely want to shop around and
compare fees from different companies. Make sure
you get a clear, itemized list of all the fees
they charge. storage fees, management fees, insurance,
the whole nine yards. And don't be afraid to
ask questions. If something isn't clear, ask
for clarification. A reputable company will be
happy to explain everything to you. Good advice.
Anything else? Yeah, customer service is important.
You want a company that's responsive and helpful
with people who can answer your questions and
address any concerns you might have. OK, so we've
talked about reputation, fees, customer service.
What about the actual storage of the gold? How
does that work? As we mentioned earlier, you
can't just keep the gold at home. It has to be
stored in an approved depository, which is basically
a secure vault designed for storing precious
metals. And these depositories, are they insured?
They should be. And you'll want to make sure
that your gold IRA includes insurance coverage
for your gold as well, just in case. You want
to be protected against theft, damage, natural
disasters, all of that. So it's really important
to do your homework to understand all the ins
and outs before you commit to a gold IRA. Absolutely.
It's not something to rush into. OK, so let's
wrap things up with a few key takeaways. What
are some of the most important things for our
listeners to remember? What are the biggest potential
risks? I think the first thing to remember is
that gold prices can be volatile. They can go
up and they can go down. And if you're borrowing
money to invest in gold, that volatility can
really magnify your risk. Right. So leverage
can be a dangerous game. It can be. Another key
takeaway is that gold IRAs come with costs, storage
fees, insurance, management fees. Those costs
can eat into your returns. So it's important
to factor them in. And then, of course, there
are the tax implications. You need to understand
how gold IRAs are taxed both before and after
retirement to avoid any unpleasant surprises
down the road. And perhaps most importantly,
you need to choose your Gold IRA company and
custodian very carefully. Do your research, make
sure they're reputable, and make sure you understand
all the fees involved. Absolutely. So, the bottom
line is this. Gold IRAs can be a part of a diversified
retirement portfolio, but they're not for everyone.
You need to weigh the potential benefits against
the potential risks and make an informed decision
based on your individual circumstances and financial
goals. Well said. So here's a final thought for
our listeners as you continue your research on
gold IRAs. What are the most important questions
you need to ask yourself, given what we've discussed
today, to determine whether a gold IRA is the
right fit for your retirement plan? Thanks for
joining us today, everyone. Thanks for having
me.