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Allegiance Gold: How Much Do You Need?

Everyone’s road to retirement is personal, and it’s likely to include lots of twists, turns and roadblocks that a trusted financial adviser can help you navigate. Along the way, you’ll encounter lots of questions, one of which is “how much do you need to save?”

It’s impossible to pinpoint precise answers to questions such as this because no one knows how the markets will behave and life brings lots of unexpected challenges on the road to retirement. One thing that has remained true throughout the past century is that gold and other precious metals is a great investment — and that’s something the experts at Allegiance Gold can help you with.

Here’s a look at some factors that can help you understand how much retirement savings you need.

Retirement Income

One of the most important things a financial adviser at Allegiance Gold can help with is estimating your retirement income needs. If you are many years away from this, estimating income can be tricky, but we can help you figure out what percentage of your annual retirement income will come from retirement savings accounts, such as 401ks, IRAs and pensions.

How Much Do I Need to Save for Retirement?

In general, you should aim to maintain a healthy savings rate throughout your working years. How much you need to put away per paycheck or year depends on factors including:

  • How much you need to live/maintain your desired quality of life
  • How many years you have left until retirement
  • How many other assets you have

Contact Allegiance Gold to Get Started

For help with securing your financial future in retirement, contact Allegiance Gold to find out about the benefits of precious metal IRAs.

In-kind Distribution

An in-kind distribution is simply a distribution of your asset in the kind that it was stored. In the case of precious metals, you’d take the distribution as a physical product — if you’re holding gold in the IRA, you’d receive gold bullion or coin. If you’re holding silver, you’d receive silver.

This can be advantageous in certain situations, such as if you’re over 70.5 years of age and must take forced distributions. You may be reasonably certain your precious metal will appreciate, so you take it in-kind and hold on to it for a later profit if you don’t need the cash today.

Bullion vs Proof vs Numismatic

The type of coins and metals you might hold in your IRA are not all the same. They can be bullion, proof or numismatic.

  • Gold bullion has a recognized weight and fineness and is stamped as such. Most people think that bullion only comes in “bricks” or bars that are stored in depositories, but bullion coins are made from this same type of gold each year, making them easier to own (a coin is smaller, and thus a less expensive investment, than an entire bar).
  • Proof coins have value that’s related both to their melt value (the intrinsic value of the gold used to make them) and their own design and rarity. Only a certain amount of these types of coins are made with each run, making them limited edition and valuable in and of themselves. That can help protect your investment.
  • Numismatic coins tend to be older coins that have gained value among collectors. They are valued both for their precious metal content and their artistic or collector’s value. They must be independently certified by third-party services that grade them and provide some information regarding their value. Example of numismatic coins include the $5, $10 and $20 Indian and Liberty gold coins.

ETF vs. Physical Gold

An ETF is a paper asset backed by the value of gold — but it’s not the same thing as owning physical gold. ETFs are like buying stock in gold. The value of the ETF goes up and down with the value of gold, but you can never exchange the ETF for actual gold (or any other precious metal).

ETF stands for Exchange Traded Funds, and it’s a financial product that tracks the performance of the underlying asset (whether that’s a precious metal like gold or silver or a commodity like oil). Another way to own a paper asset related to gold is to own a share in a mining stock; again, you’re value is related to the value of the mining company and gold, and you can’t receive precious metal as a distribution.

While ETFs may be a good way to hedge in your financial portfolio or diversify your options from straight stocks, physical precious metals are almost always a more stable option because their values are impacted by less factors. You can also take in-kind distributions and hold the physical assets yourself, which isn’t possible with an ETF, which isn’t backed by a physical asset at all.

Effects of Inflation on IRA

As inflation rises (and it always does over long periods of time), the same amount of money doesn’t buy the same number of goods. For example, in the early 1900s, a loaf of bread costs about 5 to 10 cents. In the early 2000s, that same amount of bread can cost $2.50 or more. And the Bureau of Labor Statistics notes that from 2000 to 2018, the price of bread rose on average about 66 percent.

In 1958, a movie ticket cost about $1. Today, the average is more like $10. Your dollar doesn’t buy as much today as it did decades ago (or even a few years ago).

Inflation does have an impact on all investments, as the dollars you earn today on those investments buy less in the future. However, precious metal investments, and especially gold, can provide some buffer against inflation simply because they increase in value at such a consistent pace. In some cases, gold’s value increases in line with or ahead of inflation.

The experts at Allegiance Gold can help you understand more about how your Gold IRA works within the overall economy.

Traditional vs. Roth IRA

IRAs aren’t the only types of retirement accounts you can fund. Some other types include 401(k), 403(b), 457, TSA, TSP and pension accounts. They each hold a place in retirement planning, and working with financial and investment experts helps you understand which types of accounts are right for you.

One decision you may need to make is between traditional IRAs and Roth IRAs. One of the biggest differentiators between these two types of retirement investments is that you fund traditional IRAs before taxes and Roth IRAs after taxes. That means traditional IRAs offer some tax incentives at the time you are saving (which means you may be able to save more), but if you withdraw early, you can pay a heft tax penalty. Earnings on your traditional IRAs may also be taxed, whereas Roth IRA earnings and withdrawals usually aren’t taxes (because you already paid taxes on them).

Traditional IRA contributions are tax deductible depending on your financial status and whether you have access to an employer sponsored 401(k). Roth IRAs don’t have these requirements, but do have income-eligibility restrictions. For example, if you had a modified gross income of more than $135,000 in 2018, you would not be eligible to contribute to a Roth IRA that year.

Understanding the best way to hold gold in an IRA can help you create a retirement savings plan that works for your future. The experts at Allegiance Gold can help you understand your options for holding physical assets and how to work them into your retirement savings plans.

Rollover IRA

A rollover IRA is a type of traditional IRA. It’s most often used by people who change jobs or retire and need to move their 401(k), which is attached to their employment, into a new financial vehicle. You generally can’t keep your investment in an employer-sponsored 401(k) when you no longer work for the employer (though there may be a specific grace period associated with each type of account or employer plan).

Simply withdrawing all the funds from a 401(k) is an option, but that can lead to hefty tax penalties. You’ll pay at least a 10 percent penalty for early withdrawal if you aren’t of age for retirement distributions.

You can move your 401(k) value into a traditional IRA without tax consequences. This is because a traditional IRA is funded with pretax dollars just like a 401(k) is. You lose some of these tax benefits if you choose to roll any of your retirement funds into a Roth IRA, which is not funded by pretax dollars. At that time, you would have to pay taxes on those funds.

Rollovers can get a bit complicated, so reach out to your Allegiance Gold representative if you’d like to put your 401(k) funds into a precious metal IRA.

IRA versus 401(k)

Both IRAs and 401(k)s are extremely common retirement savings vehicles, but they are used for different purposes. A 401(k) is a qualified employer-sponsored savings plan for retirement. That means that you can fund it as long as you work for the employer sponsoring it; often, the employer will match a certain percentage of the funds, which can help you grow a retirement savings even faster. You fund a 401(k) with pretax dollars, usually taken right from your check before you receive your payment. That makes it easy to save, because you don’t really miss the money.

A traditional IRA is another pretax method for investing for retirement, but it’s not linked to an employer. Most people can invest in a traditional IRA with pretax dollars, making it a great option for the self-employed. You can also roll your 401(k) savings into a traditional IRA without tax consequences if you leave your current job or retire and need to move funds from the employer-sponsored 401(k).

Both of these option are solid retirement savings plans, but you can’t always hold physical assets like gold in a 401(k). If you’re looking to diversify your portfolio with precious metals, contact Allegiance Gold to find out more about Gold IRAs.

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