Should You Get a Gold IRA? Find Your Answer!

Amidst the current financial uncertainty, investors are increasingly drawn to the captivating appeal of gold. However, it’s crucial to determine whether gold investments in IRA present a genuinely lucrative opportunity or a potentially risky endeavor.

In this blog post, we delve into the realm of investing in a gold IRA, examining the potential gold IRA pros and cons.

We invite you to join us as we uncover hidden truths, dispel common misconceptions, and equip you with the knowledge necessary to make an informed decision regarding your financial future. So, get ready to embark on a journey through the radiant world of gold investments in IRA!

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What Is a Gold IRA?

A Gold IRA , also known as a precious metal IRA, can include physical gold in your retirement portfolio. This can be as bars or coins. Other approved precious metals like silver, platinum, and palladium can also be held.

Why invest in a gold IRA? Similar to other IRAs, gold investments in IRAs follow the same contribution limits and withdrawal requirements. For example, in 2022, the contribution limit for IRAs is $6,000, or $7,000 if you’re 50 or older.

Collin Plume, CEO of Noble Gold Investments in Los Angeles, explains that when you acquire gold through a Roth IRA (gold IRA), you only pay taxes on your contributions, not the gains. With a traditional IRA, you can defer paying taxes until you liquidate, giving you the flexibility to invest that money elsewhere.

You will need to wait until you reach the age of 59 1/2 to make withdrawals. Failing to do so may result in penalties on the amount you withdraw. Once you turn 72, you must take withdrawals from a traditional IRA, known as required minimum distributions.

However, no mandatory distributions are associated with Roth IRAs during your lifetime.

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How Does a Gold IRA Work

If you're an investor looking to benefit from the tax advantages of an Individual Retirement Account (IRA) while also investing in gold, gold investments in IRA could be a suitable choice for you.

Why invest in a gold IRA? With gold investments in IRA, you can hold physical precious metals in your account while enjoying the same tax benefits as traditional IRA investments in paper assets like stocks, bonds, and mutual funds.

Gold investments in IRAs operate under the same contribution limits and regulations regarding required minimum distributions (RMDs) as regular IRAs.

Types of Precious Metals That Can Be Held in a Gold IRA

Why invest in a gold IRA? In gold investments in IRA, you have the option to include other valuable metals like silver, platinum, and palladium. This is why you might come across terms like "silver IRA" or "precious metals IRA ."

Technically, the latter is the most accurate term, but "gold IRA" is commonly used to refer to this type of investment vehicle. To be approved for an IRA, precious metals must meet certain requirements for purity.

Gold must be 99.5% pure, silver must be 99.9% pure, and platinum and palladium must be 99.95% pure. The IRS also has regulations regarding the size, type, and weight of precious metals that can be included in an IRA.

Examples of commonly accepted metals include American Eagle-proof coins, bullion, and Canadian Maple Leaf coins.

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Advantages of Gold Investments in IRA

Why invest in a gold IRA? If you’re interested in gold investments in IRA for its potential returns, you may find it advantageous to have your precious metals stored in an Individual Retirement Account (IRA).

Gold IRAs are a specialized investment option most suitable for experienced investors familiar with trading physical precious metals. Some advantages of investing in gold IRAs include:

Tax Benefits

Why invest in a gold IRA? As stated earlier, gold investments in IRAs offer the same tax advantages as a traditional IRA. You can make pre-tax contributions, reducing your taxable income, and you won't owe any taxes until you withdraw the funds.

Portfolio Diversification

Why invest in a gold IRA? Investing in precious metals, such as gold IRAs, is commonly used to add variety to a portfolio. It’s important to note that financial advisors often suggest allocating only a small portion, around 5-10%, of your total investments to precious metals.

Protection Against Inflation and U.S. Dollar Weakening

Why invest in a gold IRA? Gold can be a valuable asset in an investment portfolio as it’s a reliable store of value that maintains its worth over time.

Why invest in a gold IRA? Gold tends to have an inverse relationship with the stock market, making it a useful tool for reducing losses during economic downturns and providing a sense of security during periods of market instability.

However, it’s important to acknowledge that gold prices can fluctuate and decline, so it’s advisable not to invest in it for short-term gains.

Potential for Long-Term Growth in Your Retirement Savings

Why invest in a gold IRA? Investors are attracted to precious metals due to their inherent worth, even though their prices vary, particularly in the short run. If you’re considering starting a gold IRA, having a long enough time horizon to withstand these fluctuations is important.

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Disadvantages of Gold Investments in IRA

Although the idea of having physical gold in your retirement account may seem attractive, gold investments in IRA may not be suitable for all investors.

There are specific drawbacks associated with gold investments in IRA, and not being well-informed about these crucial details could lead to a potentially expensive error with your savings. The disadvantages encompass:

Fees

Gold investments in IRA generally have higher expenses compared to traditional 401(k)s or IRAs. This is primarily due to the increased management involved, which often requires an account custodian to oversee your gold IRA.

Because IRS regulations mandate that IRA gold be stored in an approved depository facility, you will incur storage fees to protect and insure your precious metals.

Furthermore, gold investments in IRA companies generate their revenue by implementing a pricing structure known as a "spread." Essentially, this means that when you purchase gold from a gold IRA company, they sell it to you at a higher price than what they would pay you when you sell that gold.

Not the Same Long-Term Growth Potential as Assets Like Stocks

While gold holds its own value, there’s no assurance that its price will increase by the time you decide to sell it. This can pose a problem if you rely on your IRA for retirement income, which is true for many individuals who choose gold investments in IRA.

You may be compelled to sell your gold at a loss. Similarly, when you reach the age where you’re required to take Required Minimum Distributions (RMDs), you’ll have to either sell your gold or bear the cost of having it shipped to you. Afterward, you will need a secure location to store it.

Gold Doesn’t Pay Dividends

While gold is often seen as a safeguard against inflation, it lacks the ability to generate income, unlike stocks or bonds that pay dividends or yield to maturity. The income generated by traditional investments plays a vital role in building long-term wealth through compounding.

Limited Liquidity

Portfolio rebalancing involves adjusting your asset allocation to match your goals, timeline, and risk tolerance. Financial advisors recommend doing this regularly, especially as retirement approaches.

However, if you trade precious metals instead of stocks or ETFs, the process can be more complicated and costly. Unlike stocks or ETFs that can be traded commission-free on online brokerage platforms, trading precious metals may involve additional fees and challenges.

How to Decide if a Gold IRA Is Right for You?

If your IRA is invested in stocks and bonds, there are three ways to increase your wealth. Firstly, the value of the shares you purchase may appreciate over time. Secondly, you could receive dividends from those shares and reinvest them.

The interest you receive from bonds or bond funds can be reinvested to grow your money. However, when it comes to gold investments in IRA, you eliminate two of these growth opportunities. Gold doesn't generate interest or dividends.

Your money relies solely on capital appreciation and timing. Before entrusting your retirement to gold investments in IRA, consider examining the long-term price history of gold and deciding if you’re comfortable betting your retirement on it.

What to Consider Before Gold Investments in IRA?

Similar to other significant financial decisions, it’s crucial to approach opening gold investments in IRA with thorough consideration and adequate education.

It’s important to obtain information from impartial and reliable sources before investing in a gold IRA, rather than relying solely on gold investments in IRA companies that have a vested interest in promoting their services.

Before investing in a gold IRA, it’s essential to carefully evaluate why invest in a gold IRA and factors such as.

Investment Goals

If you’re unsure about whether gold investments in IRA are suitable for your retirement savings, it's best to seek guidance from a fiduciary financial advisor.

These professionals are legally obligated to prioritize your financial well-being. While gold investments in IRA companies may promote themselves as knowledgeable advisors, it’s not advisable to rely on them for investment advice.

Custodian and Dealer Selection

In the world of gold investments in IRA companies, you have the freedom to select your account custodian and depository institution. However, some companies may require you to work with specific ones that they have a relationship with.

When investing in a gold IRA, it's crucial to be cautious. The top gold investments in IRA companies ensure transparent and competitive pricing for your purchases. They provide the option to repurchase your precious metals if necessary.

These companies don't burden you with extra fees and offer unbiased customer education. It's also beneficial if they have a solid reputation for excellent customer service.

It's wise to steer clear of gold investments in IRA companies that use aggressive sales tactics or try to persuade you that traditional financial institutions aren’t secure.

Risk Tolerance

Although it’s technically possible to transfer all the funds from your current retirement account to gold investments in IRA, this would come with a high level of risk.

A traditional retirement account that holds stocks and bonds allows you to have exposure to different assets, offering diversification, potential for earning income, and the ability to easily reallocate your portfolio.

Amount You Will Invest

To invest in a precious metals IRA, you have the option of transferring funds from your 401(k), 403(b), 457, pension, or Thrift Savings Plan account. When done correctly, this transfer will not cause any tax liabilities or penalties.

Before investing in a gold IRA, you need to decide how much to steep, take into account your retirement income requirements, time frame, and risk tolerance.

Tax Implications

Gold IRAs, similar to other retirement accounts with tax benefits, have their own tax implications.

To determine which type of account, whether it's a traditional IRA or a Roth IRA, will be more effective in reducing your overall tax burden, it’s important to calculate your expected retirement income.

Traditional IRA Tax Implications

Gold investments in IRA function similarly to traditional IRAs when it comes to taxes. By using pre-tax dollars, typically through rolling over funds from a 401(k) or similar account, you can fund a gold IRA.

The money in this IRA remains tax-deferred until you start making withdrawals during your retirement.

Roth IRA Tax Implications

Contrarily, a Roth IRA is established using already taxed money. The investments made within this account grow without being subject to taxes, and when you withdraw funds during retirement, they’re not subject to taxation.

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How to Open a Gold IRA?

Why invest in a gold IRA? Once you have thoroughly researched and determined that a precious metals IRA is suitable for your retirement strategy, the following steps involve selecting a provider, identifying a funding source, and acquiring the desired gold bars, coins, or ingots.

Find a Gold IRA Company

To begin investing in a gold IRA, you need to choose a gold IRA company . This company is essentially a dealer of metals, such as gold or other precious metals that will sell them to you.

They will assist you in opening and financing your account, as well as connecting you with an IRS-approved IRA custodian and depository institution. If you're looking for recommendations, Money has compiled a list of the top gold IRA companies.

Open the Gold IRA Account

The gold IRA firm will also assist you in setting up your account. It’s advisable to let them handle the transfer of funds from one institution to another when purchasing gold and silver.

Attempting to do the rollover yourself may result in severe penalties from the IRS if you unintentionally violate their strict regulations.

Choose Which Precious Metals to Invest In

Before investing in a gold IRA, the gold IRA company will assist you in choosing the types of precious metals approved for your account. The most commonly accepted options for IRA investments are gold and silver.

As a gold IRA focuses on physical precious metals, you have the flexibility to select from gold bars, rounds, various gold coins, and silver coins. Certain gold IRA companies may even provide options for IRA-approved platinum and palladium.

Finding a Broker or Custodian

While investing in a gold IRA, you must open a self-directed IRA. Unlike other IRAs, this type allows investors to manage their investments directly and have a wider range of options.

Before investing in a Gold IRA, you’ll require the services of a broker to purchase the gold and a custodian to establish and oversee the account.

According to John Johnson, the president of GoldStar Trust, based in Canyon, Texas, the custodian will store and hold your actual bullion.

Custodians are typically banks, trust companies, credit unions, brokerage firms, or savings and loan associations that have been approved by federal and/or state agencies to offer asset custody services to individual investors and financial advisors. However, they don’t choose metals dealers for their clients' IRAs.

This responsibility falls on the investor. Established custodians often have partnerships with numerous dealers across the country and may provide a list of recommendations if requested.

Conversely, some metal dealers may suggest an IRA custodian, but Johnson emphasizes that consumers are always free to independently search for custodians on their own.

How to Choose an IRA Company?

Deciding on which company to go with when investing in a gold IRA can be quite complex, especially since it's a specialized task that most big brokerage firms rarely provide.

"As I conducted my research, I identified a few key factors that held significance for me," he explains. These factors consisted of:

Track record: When searching for a company to invest in a gold IRA, it’s important to find one that has a strong reputation as recognized by reputable third-party organizations like the Better Business Bureau or the Business Consumer Alliance. It's beneficial to read customer reviews to get a sense of their experiences and the number of complaints filed before investing in a gold IRA. It’s advisable to choose companies that prioritize education rather than aggressive sales tactics.
Transparency: Having complete knowledge of all your expenses in advance can help you steer clear of any unpleasant shocks, like undisclosed charges that may crop up after investing in a gold IRA.
Qualifications: It’s crucial to only work with a company that possesses all the licenses, registrations, insurance, and bonds to safeguard your investment while investing in a gold IRA. To ensure their legitimacy, request verification of these licenses and other pertinent information.
Flexibility: Every investor has unique needs and objectives. It’s advisable to select a company that can tailor its services to suit your requirements before investing in a gold IRA instead of adopting a standardized approach that may not meet your specific goals.

Financial Institutions That Offer a Gold IRA

Not all self-directed IRA custodians provide gold management services. According to Michael Ryan, a financial coach and retired financial planner in South Florida, selecting a trustworthy custodian who will effectively hold and protect the gold when investing in a gold IRA is crucial.

When investing in a gold IRA, some reputable establishments that offer gold IRAs are:

Augusta Precious Metals - Best Precious Metal IRA Company Overall

Star Rating: 4.9/5

Augusta Precious Metals , a leading company specializing in gold IRA services, boasts over 45 years of industry experience. They offer a wide range of investment products, including silver and gold bullion. What sets them apart is their commitment to transparency.

They provide clients with detailed expense breakdowns and even offer one-on-one web panels to ensure their customers have all the information they need. Unlike other companies, Augusta Precious Metals doesn't charge any transaction fees. There are price spreads associated with physical metals.

Although they require a higher minimum investment, Augusta Precious Metals has built a strong reputation for being a trustworthy choice in the industry. They have a solid refund policy and offer secure storage facilities for their clients.

Their metal selection is limited, and their minimum investment requirement is higher than some competitors. Their exceptional customer service makes up for these drawbacks.

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American Hartford Gold - Best Precious Metals IRA Company for Small Investments

Star Rating: 4.7/5

American Hartford Gold is a well-respected company specializing in gold IRAs. They have a proven track record and receive high ratings from satisfied customers.

Their range of services includes precious metal IRAs, gold and silver IRA rollovers, and direct purchases of gold and silver bars/coins. The minimum investment required for direct purchases is $5,000, while gold IRA rollovers require a minimum investment of $10,000.

This flexibility allows investors to choose the option that suits them best. American Hartford Gold works with trusted partners such as Equity Trust as a custodian and offers secure storage options through reputable companies like Brinks and Delaware Depository.

To ensure ongoing support, they provide dedicated account representatives, and they also offer a free guide to help investors make informed decisions.

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Oxford Gold - Best Precious Metals IRA Company for Educational Resources

Star Rating: 4.2/5

Oxford Gold Group is a well-known company that focuses on helping individuals plan for retirement by investing in precious metals IRAs.

They provide professional advice and a variety of services, such as buying physical gold, establishing gold IRAs, and diversifying portfolios with silver, gold, platinum, and palladium.

They place a strong emphasis on educating their clients and offer secure storage solutions through trusted facilities like Brinks Depository and Delaware Depository. Although the ownership of Oxford Gold Group isn’t widely known, its goal is to serve as a guiding force for individuals who want a prosperous and diverse retirement future.

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Lear Capital - Best Precious Metals IRA Company for First-Time Buyers

Star Rating: 4/5

Lear Capital is a well-respected company in the industry of precious metals IRAs. They specialize in offering valuable metal coins to help diversify IRAs. Their approach is personalized, with dedicated account managers and a strong emphasis on fee transparency.

Lear Capital has garnered positive feedback from clients and has maintained a high Trustpilot rating. With nearly a quarter-century of experience, their goal is to provide a smooth investment process and expert guidance for those interested in precious metals IRAs.

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Goldco Precious Metals - Best Precious Metals IRA Company for Customer Support

Star Rating: 3.9/5

While investing in a gold IRA, Goldco Precious Metals is a reputable company that specializes in gold IRA services. They offer various investment accounts, such as cryptocurrency and gold or silver IRAs.

Their website is user-friendly and provides clear instructions for setting up self-directed precious metals IRAs. Clients can expect personalized assistance from dedicated specialists who provide top-notch customer service.

The only downside of investing in a gold IRA is that the company doesn't disclose its gold IRA fees. On the positive side, Goldco also provides clients with a gold IRA rollover kit to facilitate safe and straightforward investment plans for gold rollover IRAs.

Costs of a Gold IRA

When investing in gold, it’s important to store your assets in an IRS-approved depository. This entails paying storage fees and insurance costs.

Additionally, there are fees for purchasing and shipping precious metals. Custodian management charges may be higher compared to other retirement accounts.

Special Costs

Having a gold IRA does come with certain unique costs. Investors will incur charges such as:

Custodian Fees: Once again, it’s important to note that annual costs, as well as any additional fees related to assets or transactions, are applicable to all IRAs. However, it’s possible that these costs may be higher for this particular type of account, particularly if you’re required to use a different financial institution than the one holding your other accounts.
Seller’s Fee (Markup): "According to Sentell, gold prices may vary depending on the type of gold you want to purchase, such as bullion, coins, or proofs. The markup and fees associated with each type of gold can also differ depending on the vendor. It’s important to note that when selling gold, each form has its specific requirements that investors need to consider."
Retirement Account Setup: The initial fee is applied to set up your IRA account. The amount may differ depending on the institution, as not all financial service providers handle gold IRAs. It’s important to note that this fee may be higher than the standard setup fee.
Cash-Out Costs: If you decide to sell your gold from a gold IRA to a third-party dealer, they’ll likely offer you a lower price than the current market value. Unless the prices have significantly increased since you purchased the gold, you might lose a considerable amount of your investment.
Storage Fees: When investing in a gold IRA, the gold must be kept in a storage facility that meets certain qualifications, and there will be fees associated with the storage.

Certain companies that deal with Individual Retirement Accounts (IRAs) may offer a guarantee to repurchase your gold at the current wholesale rates.

However, it’s important to note that closing the account could still result in financial loss. This is unlike the usual scenario with regular IRAs, where opening and closing accounts typically don’t lead to monetary losses.

Required Minimum Distribution (RMD) Problems

The timing for starting your mandatory withdrawals from a traditional gold IRA is determined by age or birth year. You’re required to begin these withdrawals by April 1 of the year following the one in which you turn:

70½ if you turned that age before Dec. 31, 2019
72 if you turned that age between Jan. 1, 2020, and Dec. 31, 2022
73 if you turned that age after Jan. 1, 2023

Metals, as you may know, aren’t easily convertible into cash, which can pose a challenge when it comes to funding distributions. This might force you to sell your gold even when it may not be in your best interest.

However, there’s a potential solution to this problem - you can offset the total amount of your Required Minimum Distributions (RMDs) by withdrawing from other traditional IRAs.

Withdrawing From a Gold IRA

The guidelines for making withdrawals from gold investments in IRA are comparable to those of other Individual Retirement Accounts. Gold investments in IRA, like other IRAs, can be set up as either a traditional or Roth IRA.

For Traditional Gold IRAs

There’s a 10% penalty for withdrawals made before age 59
Once you reach age 73, you'll have to start taking RMDs
Pretax money is used to make contributions
All payments are treated as regular income for tax purposes

For a Gold Roth IRA

Cash after taxes is used to make contributions
Withdrawals don’t trigger any tax liability
A 10% penalty will be imposed on distributions taken before the age of 59 and ½

Checkbook IRAs

One way to avoid the need for a custodian and the associated costs is by opening a "checkbook IRA." This is a self-directed IRA that doesn't require custodial management. However, setting up a checkbook IRA can be complicated, as it requires being a Limited Liability Company (LLC) and having a business checking account, among other requirements.

With a checkbook IRA, investors can purchase American Gold Eagle for their retirement accounts and personally hold them, thus avoiding custodian and storage fees. This is a unique exception in the tax code, specifically mentioned in the Internal Revenue Code (IRC) 408(m).

The IRS is currently scrutinizing this type of IRA, so caution is advised when considering this option.

Rolled Gold

If you already have an IRA or 401(k), whether it's a regular or Roth account, you can choose to transfer some or all of its funds into a gold IRA. The process for rolling over the funds is the same as for any other retirement fund.

You'll need to fill out an account application, either online or on paper, and the account will usually be set up within 24 to 48 hours after the application is completed and received.

According to Gottlieb, once the signed transfer request is received by all parties, the two custodians will communicate with each other to transfer the funds to the new custodian and establish a new gold IRA.

When the funds are available in the new IRA account, an account representative will review the current options for purchasing precious metals. You can specify the exact type you want to purchase, and the prices will be locked in.

Gold’s Special Risks

Investing in a gold IRA, like any other investment, carries risks and rewards. The price of gold can be volatile, and its future cannot be accurately predicted.

However, despite the risks, there’s a valid reason to allocate some retirement funds to gold investments in IRA.

Gold has a long history of being a reliable store of value, unlike stocks that can become worthless or bonds that can default. The value of the dollar has been steadily decreasing over time, whereas gold will never be worth zero.

If the price of gold decreases, it likely means that your other paper assets are performing well. By maintaining a balanced portfolio with gold and paper-based investments, any loss from gold can be offset by gains from other assets.

Traditional IRAs also carry similar risks, but gold investments in IRAs have advantages that traditional IRAs lack.

However, investing in a gold IRA does come with its own set of risks. Any physical commodity is susceptible to theft, meaning that someone could potentially break into the storage facility where your gold is being kept.

However, to qualify for gold investments in IRA, the storage facilities must have insurance coverage. This means that as long as the value of your account doesn't exceed the stated limit set by the custodian, your gold investments in IRA will be protected.

There are also custodians who may not be trustworthy and might steal from their customers' accounts. They may even engage in fraudulent activities by selling precious metals that they don't actually possess or have any intention of buying.

However, these risks can be minimized by selecting a custodian that provides insurance coverage for financial transactions.

Why Invest in a Gold IRA?

Why invest in a gold IRA? Investors often opt for gold to add diversity to their investment portfolio, either through a gold IRA or direct metal purchases. While gold can play a role in a well-diversified portfolio, it's crucial to consider the risks associated with buying gold compared to other assets.

When it comes to saving for retirement, selecting assets that offer long-term returns is crucial. Unlike stocks and bonds, gold doesn't provide any dividends or yield to its owner. The only potential for profit lies in the gold's appreciation price itself.

Considering that the stock market typically sees an average annual increase of around 7%, it's unlikely for gold investments in IRA to outperform other retirement investments.

Why Invest in a Gold IRA? – FAQs

How Do You Buy Gold in an IRA?

There are two options for investing in a gold IRA. The first option is to establish a self-directed gold IRA, which permits the purchase of physical gold and silver using retirement funds.

Another possibility is to invest in a mutual fund or ETF that focuses on precious metals. However, it's important to note that this doesn’t involve owning physical bullion.

What Is IRA Eligible Gold?

While investing in a gold IRA, only specific types of gold investments are permitted. To be eligible for an IRA, bullion coins must be legal tender and have a purity level of 99.5% or higher.

Bullion bars and rounds are also allowed, as long as they have a purity level greater than 99.9%.

Who Holds My Gold in a Gold IRA?

While investing in a gold IRA, you must store the precious metal with a custodian approved by the IRS. If you try to physically possess the gold, it’ll be considered a withdrawal and subject to appropriate taxes.

Gold Investments in IRA: The Bottom Line

Gold Investments in IRA are typically categorized as non-traditional investments, meaning they aren’t publicly traded and require specialized knowledge to determine their value. Although gold can offer significant returns, it’s important not to be swayed solely by its allure.

Gold prices can unexpectedly decline, and when investing in a gold IRA, you must consider if you would be purchasing near or at the market's peak if you choose to invest during a rising gold market.

If you're thinking about investing in a gold IRA, it's important to seek advice from a financial advisor to determine how this precious metal aligns with your overall portfolio objectives. It’s not advisable to allocate all of your assets into one investment.

If you believe that gold is a suitable option for you, it’s recommended by Sentell to allocate no more than one-third of your retirement funds into gold Investments in IRA.

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