Do You Need Gold for Retirement?

- June 4th, 2019

Are you wondering if you should invest in gold for retirement? Let us walk you through the pros and cons of this strategy.

Gold is known as a safe haven investment that people from all walks of life can turn to in times of turmoil. While its price rises and falls, interest is fairly constant. 

One question that many people have is, “Should I invest in gold for retirement?”

That’s a fair question, and not just because gold is a popular investment. Just think — while the gold price is subject to fluctuations, it’s risen about 110 percent in the last decade, and just over 300 percent since 2002. For those looking at investing in gold for their individual retirement account (IRA), those returns are hard to ignore.

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With that in mind, it’s interesting to take a balanced look at gold investing for your retirement plan — after all, though gold is certainly a compelling investment, it’s not right for everyone. The lists of pros and cons below are designed to help you figure out if gold for retirement will work for you.

Gold for retirement: The pros

If you’ve already invested in gold, you’re likely well aware of the benefits that can come when you buy gold. However, you may be wondering if those financial benefits will carry over if you invest in gold for your retirement savings. Here’s a brief overview of the positive side of saving gold for retirement:

  • Gold is good in a crisis: As anyone who gives out investment advice will tell you, the gold price tends to rise during economic and political volatility, meaning that in the face of a crisis, it’s often either stable or on the rise. Some investors see it as purchasing power and consider it an insurance policy. “I sleep better at night owning physical precious metals,” Rick Rule of Sprott (TSX:SII,OTC Pink:SPOXF) has said. And who doesn’t want peace of mind that there will be wealth in retirement?
  • Gold is a hedge against inflation: On a similar note, gold is prized as a hedge against inflation. In other words, no matter what happens with paper currencies, the value of gold will stay constant.
  • You can physically hold gold: If you buy gold bullion, such as gold coins or gold bars, you’ll have a tangible asset allocation that you can access readily. That’s partially why gold has advantages in a crisis — unlike non-physical assets like gold stocks, physical gold is a transaction that you can grab hold of easily in times of volatility and know you have something of value.
  • Gold has gained significantly: Last but not least, don’t forget the major gains gold has made in the past, as secure levels of supply and demand for gold have pushed up prices. As mentioned, the metal has seen big price increases not only recently, but also in the last century. And with uncertainty running rampant in the world today, it could be poised to move even higher, leaving you with more wealth in your golden years.

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Gold for retirement: The cons

That’s a solid list of pros, but before investing in gold for retirement, it’s important to also take a look at some of the problems it can entail. Here’s a quick rundown of the other side of the argument:

  • Gold doesn’t pay interest or dividends: While gold is good to have in times of turmoil and can be better to hold than paper currencies, you won’t be able to profit from your gold unless you make withdrawals and sell it. That means you’ll have to always have an eye on the market so that you know when you should sell — perhaps not how you want to be spending your time later in life.
  • Gold might not be the best inflation hedge: As discussed, gold is considered a hedge against inflation, but as some market watchers have pointed out, that may not be the case.
  • Stockpiling gold requires space and/or money: It’s clear that holding physical gold can be an advantage, but it also has its drawbacks. For instance, where are you going to put your gold bullion? You could keep it at your home, but most advisors would sway you away from that method because you’ll need space and a secure place to put it; both of those are potential issues for those looking to downsize for retirement. And if you want to hold it elsewhere, there will be costs associated with that and you’ll also lose the ability to access your gold whenever you want.
  • Gold can be volatile: We’ve already gone over the massive price gains gold has seen in the past, but it’s important to note that during that time gold has seen big drops as well. For those hoping for a stress-free IRA investment, these price changes could prove to be too much.

Gold for retirement: The upshot

All in all, it seems that investing in gold for retirement is much the same as investing in gold in everyday life: diversification is key. While gold can be a part of your retirement portfolio, you should make sure to balance it out. If you’re able to do that, you may see exciting returns appear in your savings accounts in your later years.

This is an updated version of an article first published by the Investing News Network in 2016. 

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Securities Disclosure: I, Nicole Rashotte, currently hold no direct investment interest in any company mentioned in this article.

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