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Gold has long been a popular investment asset, and the commodity’s safe-haven properties continue to attract investors today. And, it’s no secret that the precious metal is a good tool for portfolio diversification, either.
If you structure your investment as a gold individual retirement account (IRA), investing in gold can have benefits you may not have considered. In fact, there are a few different ways a gold IRA can protect your finances — some of which may be surprising to you.
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3 surprising ways a gold IRA protects your finances
When you invest in a gold IRA, there are a few hidden benefits that may come as a pleasant surprise. These include:
A gold IRA can reduce your tax burden
Gold IRAs are tax-advantaged retirement accounts. That means you may benefit from a reduced tax burden when you take advantage of them.
Whether you enjoy the tax benefits of your gold IRA account now or later depends on the type of gold IRA you open.
- Traditional gold IRAs: With traditional gold IRAs, you’ll make your investments on a pre-tax basis. So, the money you invest in your IRA will reduce your taxable income, up to the maximum allowable limit. In 2024, the IRA contribution limit is $7,000 for those under 50 years old and $8,000 for taxpayers who are 50 and over.
- Roth gold IRAs: When you invest in a Roth gold IRA, you’ll make your investment after paying income taxes. However, the gold in your account will grow at a tax-free rate. So, taking the Roth gold IRA approach will reduce your tax burden when you access the funds from your investments during retirement.
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A gold IRA can protect your estate
A gold IRA may also help protect your estate in a couple of ways. First, if you opt for a Roth gold IRA, the money you invest in the account will grow at a tax-free rate — and not just for you, but for your heirs. That’s because you paid income taxes on the tax-advantaged investment dollars before investing.
Moreover, your estate will likely go through probate when you die. During the probate process, a court will review the assets in your estate and distribute those assets among your beneficiaries. Depending on the size of your estate, this process can take months or even years to complete. Moreover, the process can become expensive over time.
The good news is that IRAs typically aren’t subject to probate. You can designate beneficiaries to your gold IRA to avoid delays and other complications associated with the probate process instead.
A gold IRA can protect your portfolio from inflation
Inflation can be a significant threat to retirement savings. After all, depending on the state of the economy, many safe havens — like treasuries and other interest-based investments — may fail to keep up with inflation.
But gold is a different type of asset. The price of gold tends to head upward when the value of the dollar declines. It’s also one of the reasons investors tend to invest in gold during inflationary economic periods.
The bottom line
Gold has been touted as a safe-haven asset for quite some time — and IRAs come with their unique benefits and protections. And, with a gold IRA, you may be able to protect your finances while generating meaningful financial protection for your heirs.
