3 benefits of investing in gold for retirement

Large numbers of investors today are setting aside at least some of their portfolios for retirement. In fact, recent U.S. Census Bureau data shows that retirement account ownership rates for Americans between ages 24 and 64 range between 49.5% and 58.1%. At the same time, gold is growing in popularity among many investors, thanks to its rising price over the last few months and its reputation as an inflation and market hedge in the current economic climate. 

If you're considering investing in gold today, it's useful to know the benefits of incorporating the precious metal into your retirement plan so you can get the most value long-term.

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Benefits of investing in gold for retirement

These are some of the best advantages to adding gold to your retirement investments.

Diversification

Any savvy investor knows a well-diversified portfolio can help maintain your overall investment value through market ebbs and flows. 

Gold, in particular, is good for diversification because it tends to move independently of other markets. You only have to look as far back as 2022 for a prime example. While the S&P 500 finished the year down by over 19%, gold prices in December were pretty much the same as in January (though prices did fluctuate in the months between).

Nevertheless, its important to use gold alongside growth-focused investments as you build wealth for retirement.

"Gold is an infamous non-productive asset," says Ohan Kayikchyan, CFP, founder of Ohan the Money Doctor. "Gold does not earn or produce anything and the amount of gold you possess will stay the same, regardless of how much time passes. Gold very rarely beats the stocks when it comes to performance."

Hedge against inflation

Gold is also great to have in your portfolio during periods of high inflation. That's because its price often moves inversely to the value of the U.S. dollar. When inflation is high — a reliable trend which occurs in cycles over time — gold can maintain your purchasing power.

If you want to get the most value from gold over time though, it's important to choose the right allocation. Experts typically recommend investing no more than 5% to 10% of your overall portfolio into gold. This helps you take advantage of its stability, without sacrificing potential gains you can get from traditional stock and bond investing over time.

"Gold and other precious metals, as well as other commodities, can be a part of a diversified portfolio," says Adam Van Wie, CFP and chief operating officer of Van Wie Financial. But, Van Wie recommends, alternatives to traditional investments "should be evaluated carefully with the help of a financial professional."

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Timeline

Another benefit retirement-minded investors have is a potentially long investment horizon ahead of them. Gold can be ideal for long-term investors, because its value comes from price stability over time — rather than any short-term fluctuations or growth.

Just as it takes time to build wealth that can sustain you through retirement, it can take time to realize the potential of your gold investment. The economy and market environment is constantly changing. Which means you'll have plenty of opportunity to see gold's benefits as a safe haven asset and hedge against market and economic conditions over your decades of investing. 

How to invest in gold for retirement

While there are multiple ways to invest in gold, one useful gold investment type for retirement is a gold IRA. 

This type of self-directed IRA offers the same benefits as regular IRAs — you can invest up to annual limits and can withdraw your money after reaching retirement age. Depending on the type of IRA you choose (traditional, Roth or SEP), you'll get different tax advantages upon withdrawal. 

You can use your gold IRA to hold physical gold bars or coins, as long as you meet IRS requirements. Eligible gold is generally different types of gold bullion that meets weight and purity standards. You'll also need to find an IRS-approved custodian to help store your investment over time.

Think a gold IRA could be right for you? Learn more about how a gold investment company could help you through the process with a free information kit today.

The bottom line

A gold investment may be a smart choice for your retirement portfolio, depending on the details of your overall financial plan. As a good diversifier, a hedge against inflation and a source of ongoing long-term value, gold can help you maintain your investment value through fluctuating markets and economic conditions. Before you begin, consider speaking with a financial advisor about how to best incorporate any new investment into your retirement plan.