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Saving for retirement is one of the most important parts of any financial plan. No one wants to work forever, and Social Security is unlikely to be enough to take care of all of your expenses as a senior. To prepare, many people save for retirement using a workplace retirement plan, like a 401(k). That can be a smart idea because it invests money pretax and lets your wealth build over the years.
Even if you use a 401(k), though, you might want to consider opening a second retirement savings account like an individual retirement account (IRA). There is one specific type of IRA that might make sense this year — a gold IRA focused on investing in the precious metal.
If you are interested in opening a gold IRA, start the process today.
Why you should open a gold IRA in 2024
A gold IRA works essentially like any other IRA, You put money into it and invest it, letting it grow over the years until you take dispersals in retirement. You can have a traditional gold IRA, where money is put in pre-tax, or a Roth gold IRA, where it is invested after income taxes have been paid.
What sets a gold IRA apart is that you make investments related to gold, which is only an option with a self-directed IRA that allows you to invest in alternative assets. The gold options you can keep in a gold IRA include both buying physical gold and investing in companies related to the gold market, like gold mining companies.
Gold hedges against inflation
When inflation outpaces the growth of your investments, you are losing purchasing power. Unlike some investments, such as stocks, the value of gold tends to move alongside inflation, acting as a hedge. Inflation is down from where it was in 2022 but is still not under control.
“We are not out of the woods yet with inflation. It is still running above 3% annually,” says Doug Carey, a financial advisor with Wealth Trace. “When the purchasing power of fiat currencies decreases due to inflation, the value of gold can rise, preserving wealth.”
Even if the inflation rate does keep going down, when it comes to retirement, the approach should be long-term — and there may be more inflationary periods before you retire. Opening a gold IRA now will help to protect your retirement savings if and when that ends up happening.
You can start investing in gold online today.
This year could be volatile
The presidential election is likely to dominate the headlines for most of 2024. This could cause some volatility within the markets, especially if the election is close. In this situation, Carey says gold can be a “safe-haven” investment.
“[Gold] can provide stability and peace of mind in volatile times,” he says. “Given this is a big election year, I expect lots of turbulence. In an election or constitutional crisis, gold will most certainly perform well.”
If your main 401(k) is mostly invested in stocks, it could value during these and other times of market volatility. That can be especially concerning if you are close to retirement, but putting some money into a gold IRA could help balance that out.
Diversification is key
When building a retirement portfolio, diversification is one of the keys to success. Putting all of your money into one company or even one type of investment could lead to big losses if that investment doesn’t work out.
Certain investments can become worthless, at least in theory. If you buy stock shares in a company, that company could fold, leaving your investments worth almost nothing. And, when it comes to retirement, an ill-timed market turndown could leave you with a greatly diminished portfolio at the time you’re hoping to retire,
Gold, however, is a tangible asset that has been used in any number of industries. Even if other parts of your portfolio end up losing value, gold is unlikely to face significant decreases in value, which can work as a buffer if the market were to crash right before you were planning to access your retirement account.
“If there is a market crash or economic crisis, the value of your gold holdings may increase, helping to offset losses in other parts of your investment portfolio,” says Carey.
The bottom line
Opening a gold IRA in 2024 will help you plan for retirement and diversify your overall financial portfolio. Whether or not you already use a 401(k), a gold IRA might be the right choice for you. While it likely wouldn’t be wise to move all your money into gold, putting some into a gold IRA could give you peace of mind during rough periods for your other retirement investments.