If you’ve been watching the gold space in recent years, you may know that the precious metal has appreciated in value by over 750 percent since 2000, when it was under US$300 per ounce.
Even when adjusting for inflation, the value of gold is still up a significant 350 percent over that period.
Given that fact, investors may want to turn their attention to investing in gold as a retirement plan. While there are pros and cons to using gold for retirement savings, many successful investors consider the metal a safe-haven investment.
This means dedicating a portion of your retirement portfolio to precious metals could help hedge against inflation and dollar weakness. A 5 to 10 percent allocation is often recommended as a strong base.
But which options are right for you and your needs? Read on to find out about four ways you can invest in gold for retirement. From physical gold to gold exchange-traded funds and stocks to gold-backed assets, there are diverse options for those who choose to prepare for retirement with gold.
One of the first and perhaps most obvious gold investment options for your retirement portfolio is physical gold, typically purchased in the form of bullion coins or gold bars through a dealer. While that might sound simple, as with any investment, it’s important to do your research and make sure you’re using a reputable dealer.
Physical gold carries many benefits; it is a tangible, intrinsically valuable asset that can be sold when needed or when prices are high. However, as it doesn’t provide a return, gold must be sold to make a profit.
If you choose to buy physical gold, you’ll also have to consider where you’re going to keep your gold bars, coins or bullion. You could keep it in your home, but most advisors would sway you away from that method because you’ll need space and a secure place to put it, such as a safe. These are potential issues for those looking to downsize for retirement.
Many investors opt instead for the security and ease of keeping their gold at a bank depository. This does add extra costs to your investment due to storage fees and means you do not have immediate access to your gold.
For investors who want exposure to gold’s price without owning physical gold, gold-backed exchange-traded funds (ETFs) are an option to consider. Gold-backed ETFs are more accessible than physical gold as they are traded on stock exchanges and have a cheaper price per unit than an ounce of gold.
Individual gold stocks can also be an option when building a gold retirement portfolio, but they carry a higher level of risk compared to physical gold, as well as gold-focused ETFs.
Finally, if you want to invest in gold for your retirement savings, you may want to consider investing in a gold-backed retirement fund. Options for American, Canadian and Australian investors are detailed below.
There are other details to be aware of as well. For instance, the Internal Revenue Service (IRS) only allows at least 99.5 percent purity gold bullion bars and coins to be included in gold-backed IRAs, with the exception of American Eagle coins, which are 91.67 percent pure. Furthermore, gold used in gold-backed IRAs must be administered by an IRA custodian and stored at a location approved by the IRS — in other words, investors are not allowed to store this gold at their home.
All in all, it seems that investing in gold for retirement is much the same as investing in gold in everyday life: diversification is key. While gold can be a part of your retirement portfolio, you should make sure to have balance and choose the options that are right for you. Allocating 5 to 10 percent of your portfolio to gold through a mix of the options above could help support your investments during difficult times and provide strong value in the long run.
For further help deciding the best approach for your individual needs, consult a financial advisor who can help guide your investments to make sure you are on the right road to retirement.
This is an updated version of an article first published by the Investing News Network in 2016.
Securities Disclosure: I, Lauren Kelly, hold no direct investment interest in any company mentioned in this article.
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