A number of investors regularly contribute to a retirement account, but just put the statements they receive away — yet due to factors such as inflation, analyzing your savings progress is critical, Kevin DeMeritt, Lear Capital founder and chairman, says.
“People don’t spend enough time trying to figure out how to protect and grow their retirement account,” he says. “People should really take another look at that.”
While inflation has come down from the 20-year high point — 9.1% — it reached in June 2022, it has yet to reach the Federal Reserve’s intended 2% goal.
Consumers who are close to retirement age, in particular, can feel the effect of elevated inflation, according to Kevin DeMeritt.
“We don’t want your dollar bill to be cut in half in 10 years, and your retirement plans evaporate along with it,” he says. “How you protect that retirement plan is more important today than it was 10 or 20 years ago.”
Americans’ Saving Strategies
Federal Reserve research has shown defined contribution plans, such as a 401(k), are the most commonly used retirement savings method in the U.S.
Equities play a big role in 401(k) plans, according to a 2020 study from the Employee Benefit Research Institute and the Investment Company Institute, which found most plan participants had the majority of their account invested in equities.
Stocks, though, can experience significant vacillations in response to conditions ranging from global unrest to recently released economic reports. As a result, some investors opt to also include other assets in their portfolio that have historically performed stably during economic upsets, including gold.
“It’s a great diversification tool,” Kevin DeMeritt says. “Gold has outperformed the stock market since 2000.”
Lear Capital’s IRA Portfolio Comparison Calculator can show you what effect including gold, silver, or a combination of both precious metals in a portfolio could have over time.
You can invest in gold in a few different ways.
“You can hold a gold stock — an exchange-traded fund, which is just backed by physical gold — or you can be in complete control of your metals and hold them within an IRA,” Kevin DeMeritt says.
Owning coins or other physical precious metal assets in a precious metals-backed IRA allows you to decide when to sell or start taking distributions from the account.
The value of a gold mining company’s stock, however, can be subject to a number of external factors that aren’t related to the market price for gold, such as the company’s debt and earnings. In addition, the gold involved in ETFs is often kept in a different country, Kevin DeMeritt says, which could make obtaining it challenging if a problem arises.
“In most of [the] documents for exchange-traded funds, it says, ‘If there is an issue, we can give you a ‘like-kind asset,’” the Lear Capital founder says. “I don’t know any other thing that’s like gold, so I don’t know what other asset you’re going to give to me. You’ve got all these third-party risks when you own the stock or an exchange-traded fund that you do not have when you own the physical metal.”
Holding precious metal assets in a self-directed IRA, though, can offer considerable liquidity, thanks to continued demand — as well as the benefit of having a tangible investment you can sell, retain indefinitely, or pass on to future generations.
The Uncertain Road to Retirement
The economic climate in recent years, which has included high inflation and interest rates, has made saving a significant amount of money difficult for some consumers.
American workers and retirees felt less hopeful that they’d be able to live comfortably during their retirement in 2023 than in 2022, according to a survey conducted by Employee Benefit Research Institute; only 18% of workers actually feel very confident they’ll have enough money for a secure retirement lifestyle.
Inflation played a key role in both current and future retirees’ concern — 29% of workers and 42% of retired Americans said that was why they didn’t feel confident about retirement. More than two-thirds of both workers (84%) and retirees (67%) worry the increased cost of living is going to make saving money more difficult.
Four in 10 workers — and 3 in 10 retirees — aren’t sure they’ll have enough money to keep up with the cost of living and inflation in retirement.
Higher prices for goods and services mean yet-to-retire consumers may be less able to siphon funds toward their retirement savings. People who have already retired may find reduced purchasing power chips away at the value of what they’ve saved.
Having separate resources to supplement any Social Security benefits you’ll receive in retirement could become particularly important in the future if, as a 2023 report from the Social Security Board of Trustees suggests, one of the Social Security trust fund’s reserves will be depleted in 2033 — a year earlier than previously anticipated — and the program’s collective reserves might be unable to pay Social Security benefits in full as early as 2034.
Investors who are hoping to diversify their portfolio to potentially offset losses from more traditionally volatile assets may want to consider allocating funds toward purchasing physical precious metal assets, according to Lear Capital’s Kevin DeMeritt.
“No one has a crystal ball, so I can’t tell you when the stock market’s going to fall, or home values are going to fall,” he says. “When they happen, it can have a devastating effect, especially if you’re retired on your assets. You need something that has that inverse relationship to those kinds of asset classes.”
