5 Minute Tutorial On Retirement Planning
Retirement planning has become ever more critical in modern times. Economic uncertainties have exposed weaknesses in most paper-denominated retirement nest eggs. Changing demographics have also put a strain on pensions and social security. This has thrown their future viability and solvency into jeopardy. Any retirement plan must therefore be adequately funded and diversified to insure against these risks.
Types of Retirement Accounts
Tax-efficient retirement accounts form the basis for holding retirement savings. This is because they offer tax-free growth for your investments. An Individual Retirement Account (IRA) is a savings account used for retirement investments such as stocks, bonds, mutual funds, and precious metals. They include:
- Traditional IRA: there are no annual income limits, and taxes on interest, dividends, and capital gains are deferred until retirement. Tax deductions are done only when withdrawals are made during retirement.
- Roth IRA: this account is funded with after-tax money, meaning no taxes will be paid upon withdrawal in retirement, while still letting your money grow tax-free.
- Gold IRA: this is used to hold savings in precious metals such as gold or silver, and enjoys the same tax breaks as other IRAs.
- 401(K): this is a retirement savings account funded through pre-tax deductions from your paycheck. It usually includes a matching contribution from your employer. Investments in these accounts are restricted to particular mutual funds.
Which is the Best Retirement Account?
How you invest your retirement money should be influenced by several factors. These include a favorable return on investment, and protection against inflation. Furthermore, the more distant your retirement is, the harder it is to predict future risks. By adequately diversifying your investment portfolio, you can mitigate against most economic risks.
The global economic recession of 2008 proved just how correlated all paper-denominated investments are. What was considered investment diversification turned out to be a major folly. The best way of insuring your retirement investment is by true diversification through a gold IRA.
Advantages of a Gold IRA
A gold IRA has the same tax advantages as other IRAs. However, it is unique in ways that make it an attractive choice for retirement planning. It genuinely protects your investment savings, while providing great returns. Here is why:
- Throughout the history of the world, gold has been a store of value. Time and again, it has proven to be the only safe haven during a crisis. The prices of gold-backed securities consistently rise, as paper-denominated investments crash.
- Gold is immune to the fiscal irresponsibility of governments. Paper money operates by fiat, and can be printed at will. The fiscal policies of governments can ruin your paper- denominated investments, unlike with gold.
- Gold is the only viable protection against inflation. This is a major risk, as currency printing by developed nations becomes a common trend. Gold and other precious metals have real value, limited supply, and great demand.
- A gold IRA is a self directed IRA. This means you have a greater choice in tailoring your investment portfolio to fit your own needs. Other IRAs and 401(K) plans are restricted to mainly selected mutual funds.
You can build a gold IRA through a rollover. This is where you transfer funds from any IRA or 401(K) account to a gold IRA custodian. Look for a custodian who will buy, and store, your gold for you, so you don't have to worry about shipping or theft.
This procedure is free of any penalties, and allows you to purchase physical gold along with silver, platinum, and palladium. Other savings including cash can also be used to set up a gold IRA, so they try to make it as easy as possible for you to invest in the long-term appreciation of gold.