Whenever I look at financial news these days, I often wonder if I’m reading the day’s headlines or headlines from the week or even the month before. The word I see over and over again is “inflation”—and the tone with which it’s used seems to be getting more and more serious.
Take this January 12, 2022, article by The Wall Street Journal. The headline reports that inflation rose 7% in December 2021. As the Journal reports, this was “the fastest [increase] since 1982 and marked the third straight month in which inflation exceeded 6%.”
Take a moment and let that sink in: Every month that consumer prices continue to climb, our hard-earned dollars continue to lose their buying power. But that doesn’t mean you’re powerless. Here are three things you can do today to help protect your wealth in 2022 and beyond.
One way to help reduce your risk exposure is to put a portion of it into assets that respond differently to market factors.
We all have our own unique level of tolerance when it comes to risk, but one thing we should never fear to do is take action when we believe it’s necessary. If you’re worried about the purchasing power of your cash fading away, one way you can protect that wealth is by turning it into something other than cash: specifically, something that doesn’t respond to market factors in the same way as cash. When you hear someone talk about a “hedge” against inflation, this is what they mean—and it’s what diversification is all about.
Gold, for example, has a history of upward potential during times of economic uncertainty. And as a commodity priced in U.S. dollars, gold typically sees a rise in price when there is a rise in inflation. For these reasons, gold is often considered a hedge against inflation. Of course, gold is far from the only alternative asset you may consider as a way to reduce your portfolio’s overall risk exposure—but few assets have gold’s history of retaining its purchasing power over the long term.
Another way to help protect your wealth is by using tax-advantaged accounts.
I’m someone who loves to plan ahead. I also know that protecting my wealth can mean more than just working to retain its purchasing power—it can also mean seeking out new opportunities for growth. This is why I’m such a fan of Individual Retirement Accounts (IRAs). These accounts can provide a tax-advantaged way to potentially grow wealth over the long term.
In an article published December 30, 2021, by CNBC, Clark Kendall, certified financial planner and CEO of Kendall Capital, calls IRAs “a seed or planting that turns into a huge tree that can make a difference and will give you great shade and comfort in the years to come.”
Essentially, an IRA allows your wealth to grow tax-free, with taxes paid either upon distribution (in the case of a traditional IRA) or paid when you move funds into the IRA (in the case of a Roth IRA). Either of these may be a good option for those who don’t want to lose their purchasing power and have wealth they won’t need access to until they retire. Plus, there’s still time to contribute before the tax year ends. Those under age 50 are allowed to contribute $6,000 to a traditional or Roth IRA (or both), with those age 50 or older able to contribute $7,000.
A self-directed precious metals IRA combines the protection of alternative assets with the tax benefits of an IRA.
For some of us, one of the most important parts of protecting our wealth is control. Whatever our level of risk tolerance, we want to be the ones making decisions for our personal portfolios.
There’s a type of IRA that allows you to experience the benefits of owning an IRA, the benefits of owning physical precious metals like gold, and the benefits of making decisions for your own portfolio: a self-directed precious metals IRA. With this type of account, you get to personally select the assets that are included in your IRA. And unlike with a standard IRA, your choice of assets isn’t limited to traditional options like stocks, bonds, or exchange-traded funds. With a self-directed IRA, you can utilize a variety of alternative assets for your IRA, including cryptocurrencies, real estate, LLCs, and precious metals like gold.
A self-directed precious metals IRA may not be the right choice for everyone. But as we continue to see the same headlines over and over, warning us about increases in inflation and decreases in the dollar’s spending power, now may be the right time to begin exploring your options and then take action. What better day to start protecting your wealth than today?
To learn more reasons why gold may be a smart move in the new year, call now to receive a FREE copy of our Special Report 25 Reasons to Own Gold Now (2022 Edition).