Individuals concerned about what their finances would look like 20 years from now make plans. These plans could involve stowing away certain amounts of money periodically that can come in handy in an emergency. But a better way to secure your future might be getting your money to work for you from now.
When we say, “Getting your money to work for you”, we mean investing and one type of investment instrument worth considering is a gold IRA. There are many companies that offer gold IRA services, so, a simple Google search like “top gold IRA company 2022”, should bring up a lot of options.
But we should mention that not all these companies offer great services. You might want to do a little digging before deciding. Remember to look for reviews both on and off their websites to know what past clients think of their services. These reviews give a lot of insight into things like customer experience and so on.
That said, it is important to note that some companies find a way around this by paying people to leave great reviews about them both on and off their website. But you might just be able to tell genuine reviews from those that are not. Usually, reviews from actual customers are detailed and convey a clear message about a part of the business they liked or didn’t like.
On the other hand, reviews that have been bought are usually short and lacking any real message. They are usually around the lines of “great service!”, “Definitely recommend!”, and so on. It’s important that you research gold companies before committing because gold investments can be quite expensive and there are a lot of scam companies out there.
A safer option altogether would be approaching your banking officer for recommendations. Most banks have good relationships with credible gold companies, and they’ll be more than happy to recommend a few to their customers. Visit https://business.trustpilot.com/ to learn more about why people read reviews.
What is an IRA?
Financial planning is essential to living a fruitful life and we do this in several ways; either by saving up or as we mentioned earlier putting our money to work by investing. We also mentioned that a gold IRA is an investment instrument worth considering. But before we look at what that is, let us first establish what an individual retirement account is.
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An individual retirement account is an account with tax benefits that allows individuals to save and invest for retirement. IRAs are designed to be long-term investment instruments, so, you might want to try something else if you’re looking to cash out in a few years’ time. Premature withdrawals come with penalties like paying tax on the withdrawn amount.
There are three types of IRAs, and they are:
Traditional IRA
The way a traditional Individual retirement account works is your taxable income decreases according to what you invest. What do we mean by this? If you invest $3,000, the amount you can be taxed on will decrease by $3,000 in a year. Whenever you finally decide to withdraw you only need to pay your normal income tax. Click here to learn more about taxable income.
You might be thinking “I can put $20,000 and have my taxes drastically reduced.” Well, you might find it disappointing to know that in most cases, you cannot put in more than $6,000 in your traditional IRA. However, this limitation only applies to individual below age 50. People above 50 years of age can contribute up to $7000 annually.
The rules also differ slightly with married couples. You can deduct your IRA contributions from your taxes if you’ve not started a retirement plan. If you have a retirement plan in the works, you have a limit for the amount that can be deducted from your contributions. This depends on the combined income of you and your spouse.
Roth IRA
A Roth IRA adds a little twist to its mode of operations. When contributing, you cannot deduct anything from your taxes. But if you decide to make a withdrawal, assuming you’re of the required age of 59 ½, you won’t be taxed. You can see how it differs from a Traditional IRA.
Individuals who opt for a Roth retirement account do so because they want to pay their taxes now and be over with it. It is up to you to decide what works best for you. Unlike other IRA types, according to Roth IRA rules, you don’t need to maintain a minimum amount of money in your Roth investment account. There are also no age limitations when it comes to eligibility.
But there is a maximum amount that can be contributed annually. Same as a Traditional IRA, it is $6,000 for individuals under 50 years of age. If you are above 50 you can contribute up to $7,000. You don’t have unlimited withdrawal privileges with this type of retirement account. For single people, it is $129,000 to $144,000 as at the last record of 2022. If you are married, it is $204,000 to $214,000 also last recorded in 2022.
SEP IRA
You would often find self-employed people and small-business owners making use of this type of IRA. In fact, SEP means simplified employee pension. When it comes to taxes, it works very similarly to a traditional IRA as you are allowed to defer your taxes until the point of distribution.
If you wish to withdraw, you are limited to 25% or $61,000. A particular feature of a SEP IRA is that the owner of a business can contribute on behalf of their employees. The employee does not have this power, unfortunately.
Simple IRA
You might be wondering whether the name just means it is simple to use. Well, SIMPLE means Savings Incentive Match Plan for Employees. The tax rules are the same with a traditional IRA. Visit https://www.irs.gov/ to see how this type of retirement account works.
A major difference between this and a SEP IRA is that employees are allowed to make their own contributions. The employer is not left out either, they must contribute as well. Any contribution made by both employer and employee is fully tax-deductible.
The contribution limit for a SIMPLE retirement account is $14,000 as of 2022. Workers aged 50 and above have a catch-up limit of $3,000, also in 2022.
What is a Gold and Silver IRA?
The major differentiating factor between gold and silver or precious metals IRAs from all others is the asset that they hold. When you open this individual retirement account, you literally buy the metal and hold it. That is to say, the total amount of what you wish to invest is used to buy precious metals. “Why are more and more people becoming interested in precious metals IRAs?” one might ask.
Read Also: How to Convert a 457B Government Plan to a Gold IRA?
Well, it is because they are a more stable type of asset to invest in as they have fewer fluctuations in the open market. When opening a gold individual retirement account, all you need to do is locate a trusted custodian, depository, and a verified precious metals dealer. Once the account is all set up and is funded, you custodian handles the asset purchase and have it shipped to your chosen depository.
Final Thoughts
Hopefully, by now you’ve grasped the general idea of gold and silver IRAs and how they work. As we mentioned earlier, they are becoming popular because of the stability of the assets being held in them. That said, while precious metals investment is generally considered safe, there are some risks that you might want to know before going into it.
