Have you started planning for your retirement? What about opening savings accounts? If not, the clock is ticking. You should begin the process as soon as possible.
Right now, you might be wondering why I say that. Perhaps you’re young, and this is something that seems so far away it’s not even worth worrying about. I thought that for a long time, honestly.
However, once I started discussing this with my grandparents, my levels of understanding increased. My grandmother started saving for her retirement when she was twenty. She invested in several different categories – her portfolio was quite diverse.
When the conversation turned to IRAs, though, I was admittedly still a bit confused. How do they work? Why are they so important? Well, hopefully, today I can provide you with those answers that I had wondered about for so long.
How do IRAs work?
IRA stands for individual retirement arrangement. They are accounts that have an annual contribution limit. You are not taxed on the income that you deposit until you withdraw it. Most of those contributions are deductible or partially deductible from your taxes.
There are a few different types. Traditional, Roth and self-directed all have their own unique perks and challenges associated. The important things to ask about are the tax policies surrounding all of them. You can read more on that topic on this page: https://www.nerdwallet.com/article/investing/learn-about-ira-accounts.
If you are interested in investing in alternative assets, a self-directed one might be the best bet for you. Now, in these, you take charge of your own account. It might sound intimidating, and that’s understandable. A financial advisor is a great option to take if you want to do this but are not extremely well-versed in finances or economics.
In one of these self-directed accounts, you could put a variety of things. If you like the real estate market, you could do that. Another choice might be private placements or limited partnerships. Finally, there are commodities.
If you are not familiar with them, commodities are raw materials that are directly sold. Often, they can be used in other manufacturing processes. Some of the categories are energy, livestock, agriculture, and precious metals.
As far as energy goes, it is a fairly broad one. It may refer to fossil fuels such as coal or oil. It could also be hydropower, wind power, solar power…any other form of energy that exists. This market is volatile given the fluctuations of legislature surrounding cleaner energy sources.
Livestock usually refers to cattle, hogs, or chickens. It could also be something like mink or ducks, in some parts of the world. Agriculture is edible crops such as corn, wheat, cacao, or coffee. It can also be non-edible crops like tobacco, of course.
Now, let’s discuss precious metals. This one might not make a lot of sense to you. If you’re not sure where to start, you could look at Lear Capital reviews to get an idea of where to buy precious metals and how to begin investing. It can be confusing for the uninitiated, after all.
Silver, gold, platinum, and palladium are some of the most common precious metals to invest in. They can be made into bullion for storage if you are looking to purchase the physical metals. Just keep in mind that if you go this route, you might need some sort of custodian to help with storage.
Now, there are some small regulations from the IRS for these types of investments. Consult with an advisor or do your research to understand them better. Better to be safe than sorry later!
Is Investing in Precious Metals a Good Idea?
To some extent, the answer to this question is subjective. You see, it is a personal decision to determine if it is worthwhile or not. This is because we all have different investment portfolios and risk tolerance.
If you are looking to diversify, it may not be a bad idea. Just think about the required minimum distribution rules before you commit. If you’re not sure what that is, you can read further on it here: https://www.thebalance.com/should-you-invest-in-a-gold-ira-4173139. I recommend doing as much research as you can before looking to get into the precious metals market so that you don’t get in over your head!
In my opinion, I think deciding to invest in these metals is a good thing. You don’t have to directly purchase bullion, for example. You could buy stocks for companies that extract the metals or that refine them.
The likelihood that the market for them will crash is tiny. Because we have used them for so long, they won’t go out of style any time soon. Gold and platinum are still statements of wealth to this day!
Just make sure that you start as soon as you can. Waiting to save for retirement is a huge mistake.