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The Gold IRA: Your Protection in the “Risk Zone”


Written by John Rothans

Feb 13, 2019

No one can blame portfolio holders for being nervous these days.

As pointed out by the World Gold Council (WGC), 2018 was one of the most volatile years on record for financial markets and the worst-performing year in recent memory. The S&P 500 closed the year down 6.2%, while the Dow Jones fell 5.6%—the biggest losses since 2008. Against that backdrop, about one-third of asset holders in the U.S. are bearish about the financial markets, according to a recent AAII Sentiment Survey.

But it’s not just the financial markets that have American portfolio holders spooked.

“The U.S. retirement picture has changed radically over the past few decades,” according to financial services giant Prudential.

“[Workers] need to save for their own retirements. Income is less predictable due to new employment models. And health care costs are increasing while people are living longer, which means that workers today don’t just have more responsibility to save for their own retirements — they also need to make those savings last longer.”

Seeking Alternatives

Some portfolio holders are looking to alternatives like Gold IRAs to stabilize their assets.

Because they expect to rely less on Social Security and pensions, Prudential says, pre-retirees plan to rely on more sources of income in retirement than current retirees do.

Some pre-retirees are turning to alternatives to round out their portfolios. This includes Self-Directed IRAs, which enable portfolio holders to tap into gold and silver, among other alternative assets. Gold IRAs, which hold gold and other precious metals as assets, have grown in popularity since the Great Recession.

Download U.S. Money Reserve’s latest exclusive special report for in-depth analysis of how a Gold IRA can be a key component of your portfolio.

Among the most popular retirement accounts are the 401(k), traditional IRA, and Roth IRA. Millions of Americans rely on these plans to fund their retirement. However, all of them are vulnerable to the type of extreme volatility and dramatic market losses witnessed in 2018, and they can be short on options to help protect their money.

While regular IRAs typically are tied to the financial markets, a Self-Directed IRA can hold non-traditional assets like real estate, private notes, commodities, tax liens, businesses, and precious metals such as gold and silver.

The Self-Directed IRA is an individual retirement account that not only lets consumers pick their own asset mix but also provides a wider range of asset choices.

“Risk Zone”

Self-Directed IRAs might minimize risks for some portfolio holders.

Considering a Self-Directed IRA is particularly critical for people who find themselves in the “Risk Zone.” This is generally considered to be a 20-year period that covers the final 10 years of a person’s time in the workforce and the first 10 years of a person’s retirement.

In this two-decade span, the balances of nest eggs tend to be at their highest, while retirement dollars can be the most vulnerable to losses, particularly in the wake of a market collapse.

In a dire warning to baby boomers, pension consulting veteran and portfolio strategist Ron Surz recently wrote in a Nasdaq.com article that the 75 million Americans who now are in the “Risk Zone” could be more vulnerable to financial disaster than any other group of portfolio holders.

“Based on the history of previous U.S. market crashes,” Surz wrote, “investors who are currently entirely in stocks could lose as much as 80% of their savings if the 1929 or 2001 crashes repeat.”

To learn more about the risks of being in the “Risk Zone,” check out our exclusive special report.

Golden Opportunity

Gold and other precious metals may enhance overall portfolio performance.

Including gold or silver in a portfolio through a Self-Directed IRA can help cushion the blow of a dive in the financial markets.

The World Gold Council emphasizes that gold is:

  • A source of long-term returns
  • A diversifier that can diminish losses in times of market stress
  • A liquid asset with no credit risk that has outperformed fiat currencies
  • A way to enhance overall portfolio performance

The WGC's analysis shows that adding 2%, 5%, or 10% in gold over the past decade to the average pension fund portfolio would have resulted in higher risk-adjusted returns.

Gold is known as a hedge against inflation, deflation, currency devaluation, market volatility, and economic chaos. Cycle after cycle and generation after generation, it has proven to be a reliable safe haven and ideal protection for a retirement portfolio.

Gold is where nervous portfolio holders can find peace of mind. It’s a tangible asset that is not subject to the whims of governments and central banks around the world.

Want to find out more about how to incorporate gold into your portfolio? Download our exclusive special report today.

Allocating Your Assets

Experts recommend allocating anywhere between 5% to 25% of your portfolio toward tangible assets, like gold.

Gold can serve as an alternative to traditional holdings—an alternative that many Americans seem to be willing to consider.

A 2018 survey commissioned by Millennium Trust Co. found that a staggering 90% of high-net-worth individuals who hold IRAs are inclined to explore alternative assets. In fact, 65% of those surveyed said they’d be willing to use alternative assets to make up as much as 25% of their portfolios.

Millennium Trust noted that one potential roadblock to looking into alternatives, such as a Self-Directed IRA, is a lack of knowledge about them. More than one-third of the people surveyed admitted they hadn’t spoken to their financial adviser about alternative assets in the previous year.

This could be a financial misstep on the part of portfolio holders. While American workers most frequently cite self-funded savings such as IRAs as sources of retirement income, many overlook the potential benefit of Self-Directed IRAs that can contain gold, silver, or other precious metals.

An article published by AARP quoted Andrew Carrillo, president and founder of Barnett Capital Advisors, as saying that he suggests his clients—particularly retirees—keep 5% to 15% of their portfolios in gold. Other experts put the recommended portfolio allocation of precious metals at 25%.

However much the allocation is, gold and other precious metals held in a Self-Directed IRA can help you weather the ups and downs of the financial markets. Adding assets to a portfolio that are historically not correlated to the financial markets (such as precious metals) can offer stability when market volatility strikes, according to Bankrate.com.

“Diversification is good in a portfolio. You don’t want to hold all of one sector or [market] cap or asset,” Megan Petruska, vice president and chief operating officer of MFA Wealth, told Bankrate.com.

Some observers even suggest that because of potential tax advantages, gold actually could be a better asset inside an IRA than outside an IRA.

To investigate how to include precious metals in a Self-Directed IRA, download our exclusive special report.

Following the Leaders

Retirement funds increasingly explore alternative assets.

Individuals aren’t the only portfolio holders examining alternative assets (like precious metals). State and local public retirement systems, which hold trillions of dollars in assets, have shifted away from low-risk, fixed-income vehicles toward various alternative assets in a bid to boost returns and diversify portfolios, according to the Pew Charitable Trusts.

In a Forbes.com article about alternative assets, Chris Kline, co-founder of BitcoinIRA.com, noted that gold “has developed a reputation as a reliable asset in times of global and economic uncertainty.” He added, the price of gold has risen after many tumultuous global events, such as the Brexit controversies of 2016 and 2018.

“Ultimately, while we as individuals don’t have control over the turbulent events playing out on the global stage, we do have control over our personal finances and…portfolios. It is my opinion that a diversified portfolio, with a variety of assets that are both connected and not connected to the [markets], is an effective means of maximizing opportunity while also protecting against risk,” Kline wrote.

That’s one of many strong arguments for weighing whether gold and other precious metals are right for your own portfolio, including the possibility of setting up a Self-Directed IRA to capitalize on the safe harbor afforded by precious metals.

Curious about how a Self-Directed IRA could benefit you? Read our exclusive special report.



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