American Bullion is proud to announce the winners in our annual Scholarship Program! If you are wondering how to win a scholarship of your own, you are invited to read the essays below to learn more. Winners are selected each year, and the winning students can help you learn how to get a scholarship of your own.
Five college scholarships worth $500 each were awarded. Over 1000 applications were received in total. This year’s applicants were asked to write an essay answering the question, “What is a Gold IRA?”
Participating students offered a wide range of viewpoints, each with its own value and approach. American Bullion is proud to award this scholarship to the deserving students below.
In no particular order, the 2016 winners are:
- Patricia Giraldo of Samuel Merritt University at Oakland, California.
- Paige Burrell of Penn State University at State College, Pennsylvania.
- Kingston Hadley of the University of North Carolina at Charlotte.
- Rebekah McKinley of Penn State University at State College, Pennsylvania.
- James Marion of the University of Colorado at Boulder.
We congratulate the winners and thank everyone who participated. The winners’ essays are below. Stay tuned for information about the 2017 scholarship opportunity at americanbullion.com/scholarship.
Patricia Giraldo – Samuel Merritt University
“I’ve enjoyed the past two decades with a lucrative career in hospitality. However, after the birth of my two children, I decided to go back to school for a new bachelor’s degree in nursing to pursue a career change to pediatric nursing. Thanks to the generosity of American Bullion, this scholarship helps me reach my goal of helping improve the health of children in my community.”
Firstly, we should define an IRA, which stands for Individual Retirement Account. An IRA is an investment tool designed to help people save for retirement while offering tax advantages. It’s a special type of savings account that can be set up by a financial institution to hold and grow your money until retirement. What makes an IRA so special is the ability to have the interest, dividends, and capital gains compound in the account without taxes chipping away at it.
One way to envision an IRA is a basket of one or several types of investments tucked inside for safekeeping until our retirement years. The IRA itself isn’t the investment. Rather, the investment tucked inside the IRA is usually cash, bonds, stocks, mutual funds, or a mixture of one, several or all of these. There’s a varied selection of IRAs that people may already be familiar with and can choose from to make an impact on their financial future and retirement: Traditional, Roth, SEP, Simple, Beneficiary, and Spousal, just to name a few. A Gold IRA is an individual retirement account whose “basket” is filled with gold or precious metals as the investment that’s tucked inside for retirement. It works in the same way that a typical IRA performs, but the investment isn’t tied to paper assets, like cash, bonds, stocks or mutual funds.
Gold IRAs may hold one or more of four specific precious metals: gold, silver, platinum, and/or palladium, which must be in the form of coins or bars. The gold and other precious metals must also be in an approved form by the Internal Revenue Service (IRS), such as American Gold Eagle proof or bullion coins, or Canadian Gold Maple Leaf coins. Additionally, where the gold and precious metals are stored is equally important in order comply with the IRS. Such storage facilities include depositories that must include security precautions, like video monitoring, timed locks, and motion detectors. Storage facilities must also carry appropriate insurance to cover the value of the precious metals they’re protecting.
Why use a Gold IRA? Often, people who are making savings and investment plans for retirement will hear or use the term “diversified portfolio”. A diversified portfolio is one where a variety of investments are used to prevent or “hedge” against losses. Since some investments are more volatile, or high risk, than others, having a variety of investment products can help keep your portfolio afloat if a high-risk investment in your portfolio loses value. A Gold IRA is one of those investments that not only helps against losses in a portfolio, but it also diversifies a portfolio further by hedging against inflation. Since an IRA’s purpose is for long-term growth, the investments within the IRA tend to weather the storms of markets that dip and peak over the years leading up to retirement. Gold, and consequently Gold IRAs, are considered low-risk and stable because the value of gold and precious metals holds up over time, particularly during economic downturns. They can also help preserve the wealth that’s accumulating in your IRA and overall portfolio of investments.
Paige Burrell – Penn State University
“I’m Paige Burrell, a sophomore at The Pennsylvania State University majoring in Biotechnology. I’m thankful for this award and the opportunity to continue my education and research on the blood coagulation cascade with a little less financial burden.”
Imagine – seventy year old you, laying on the beach, cocktail in hand and a gentle breeze chilling the streak of sunscreen on your nose. It is your first week of retirement, and you are living blissfully now that you have worked off your lifetime of responsibilities. Tomorrow, your grandkids are visiting for a pot pie dinner and congratulations. Life is good.
Then, a month later, your first retirement check comes. When you open the envelope, you realize that the income is hardly enough to cover electricity and groceries. Sure, you have a little nest egg, but you have dipped into it a few too many times over the years, and now you are considering picking up a part-time job at The Home Depot like your friend Nancy.
Preparing for retirement is important, but many Americans lack the proper financial literacy to prepare themselves correctly. Many adults start saving too late, and when they do begin to invest, they limit themselves only to the popular options of stocks, employer-based 401(k)s, and Traditional or Roth Individual Retirement Accounts (IRAs). However, there are numerous other options for saving and investing, such as the Gold IRA.
In most types of IRAs, the money which a beneficiary or custodian invests is saved in the form of stocks, bonds, or certificates of deposit. Depending on the type of account, contributions may have income taxes deferred until retirement, and growth is often tax-free. However, paper investments can be intimidating and confusing, not to mention inflated and dropped at the whim of the economy. For those who wish to pursue another type of investment, there are Gold IRAs.
Gold IRAs follow the same principle as other retirement accounts – investing money long term for support after working – but the basis is in precious metals rather than paper goods. Gold (but also silver, platinum, and palladium) metal may be purchased in government-approved coin or bar form, then must be held by a custodian according to IRS guidelines. Custodians often include banks, credit unions, savings and loan associations, or other IRS approved facilities.
Precious metals have had a rise in substitution for other investment methods for a number of reasons. First of all, material gold is an excellent addition to a diversified portfolio, and metals are an especially good addition because they often fluctuate inversely to paper investments – meaning if one is doing poorly, the other is probably doing well enough to compensate. Additionally, gold is less susceptible to inflation than stocks and bonds, and therefore there is very little long term risk associated with Gold IRAs. And, although the price of gold does fluctuate, it will never hit zero – unlike some paper investments have, such as crashed stocks or Argentinean bonds.
In order to properly prepare for retirement, it is recommended that Americans save 85% of their estimated expenditures before leaving the workforce. With the aid of investment, this can be as little as 10% of every paycheck (if one starts saving early in life). However, precautions should be made to invest safely and effectively, which means beneficiaries should explore options for diversification in their retirement savings. Gold IRAs are a less discussed option for retirement planning which carries less of the risks normally associated with an IRA – so plan ahead and enjoy your beach days worry free.
Kingston Handley – University of North Carolina, Charlotte
“Currently, I am a student at the University of North Carolina-Charlotte. Due to my early exposure to the pecuniary world, my interest has always been in the financial arena. So, I plan to major in Accounting, work for one of the Big 4 Accounting Firms, become a CPA, and open my own accounting firm. Leveraging my firm’s reputation, I plan to partner with middle schools so I can mentor at-risk kids.
I am very active in my community, and even started my own mentoring club for middle school kids. I am extremely grateful for this scholarship because it will help pay for my books and supplies.”
Retirement! Most workers dream of this freedom. However, for some people, it is only a dream. According to March 2013 figures from the Bureau of Labor Statistics (BLS), only 8 percent of private-sector companies offered a defined benefit retirement plan, also known as a pension, to their employees. While the percentage of companies that offer defined benefit plans has shrunk in recent years, the number of private-sector companies offering defined contribution plans has grown. With these plans, employees are largely responsible for saving for their own retirement. For example, an Individual Retirement Account (IRA) is a type of savings account that is designed to help a person save for retirement, and offers many tax advantages. Unfortunately, due to the Great Recession of 2008, the value of most traditional IRAs declined significantly. On the other hand, the value of Gold IRAs steadily increased. A Gold IRA is an Individual Retirement Account in which physical gold is held in custody for the benefit of the IRA account owner. A Gold IRA functions the same as a regular IRA, but instead of holding paper assets, it holds physical bullion coins or bars.
Gold has been a “hot” commodity since the 1848 California Gold Rush days. The value of gold has had its ups and downs, but has basically grown steadily over the years. For example, an ounce of gold cost $271 in 2001. Ten years later, it reached $1,896—an increase of almost 700 percent! During this time period, the value of gold passed through some of the stormiest periods of recent history, when banks collapsed and currencies shriveled. The Great Recession of 2008 was a difficult time for all currencies, and the price of gold fed on these calamities. During this economic collapse, the value of gold was re-discovered when the values of other forms of currency were falling due to the debacle of subprime mortgages and other credit and banking issues. Against the odds, gold shone with the placid certainty of its rich tradition. Honored through the ages as the “standard of wealth”, “the original money”, and “the safe haven”, the value of gold was axiomatic during the 2008 Great Recession.
As such, gold is viewed as “nature’s hard asset”, unchanging and unchanged. Simply stated, gold is money that cannot be printed or debased. What better way to save for retirement than with the ultimate savings vehicle — physical gold in a Gold IRA?
A person can buy gold bullions in a self-directed IRA or 401(k) established with a trust company. People with retirement plans typically have a conventional IRA or 401(k) with a bank or brokerage firm that specializes in bank deposits, stocks, mutual funds, annuities and other assets. In many cases, these investors have little or no say in the investments being made. A self-directed plan empowers the individual to make his or her own investment decisions surrounding available investment options. Precious metals, such as gold, are among those options.
Rebekah McKinley – Penn State University
IRAs, 401(k)s, 403(b)s, and more — retirement options are a veritable alphabet soup! It’s no wonder a third of Americans have no money saved for retirement (Kirkham). Not only can savings plans be confusing, but people may also be cautious in contributing to them because inflation or market fluctuations can influence how much the savings are actually worth when they are withdrawn years later. While there may not be an easy cure for the complicated nature of savings plans, there is an IRA option that provides security against market changes and inflation.
First, what is an IRA? IRA stands for Individual Retirement Account; unlike a 401(k), for example, which requires an employer to sponsor an account on an employee’s behalf, an IRA can be opened by an individual. An IRA can be opened through a variety of financial organizations, including banks, brokerage firms, and mutual fund companies (CNN Money). Depending on the type of IRA chosen, the money is either taxed before being contributed to the account or when it is taken out, but not in both cases. An IRA is technically an investment; depending on the particular type and firm chosen, the money may be put into stocks, bonds, or mutual funds. The interest, capital gains, or dividends earned by the money while it is in the account are not taxed, which is an advantage over simply putting money in stocks, where the income earned would taxed. Once the money is in the account, it is required to stay there; if it is taken out before retirement, there may be major financial penalties. The tax benefits and the incentive to keep the money in the account are two of the main reasons an IRA can be a good investment.
The down side to any retirement account is that, when the money is taken out of the account, there is no guarantee its real value will be the same as it was when it was put into the account. One reason for this is inflation; while the money does “grow” in the account, it may not grow at the same rate as inflation, making its effective value when withdrawn less than when it was put in. Another reason is that the stock market could decline, or the national debt could cause financial problems, either of which would bring down the value of the dollar and make the money worth less.
Fortunately, there is a very good solution to these problems in the form of a Gold IRA. This is the same type of account, but instead of stocks, bonds, or similar investments, the Gold IRA contains gold. (Silver or other valuable metals can also be used.) The value of gold has stayed relatively stable throughout history despite wars and other disruptions. Even if one currency collapses, gold can always be sold in another currency. Gold is immune to stock market fluctuations and currency panics, as well as inflation. In fact, gold is virtually guaranteed to maintain its value, which means with a Gold IRA, the purchasing power of the money taken out will be the same or better as the purchasing power of the money contributed.
Many retirement accounts can be converted to a Gold IRA, including the different types of IRAs, as well as 401(k)s, 403(b)s, and more (American Bullion). It is a fairly simple process to transfer the money to the new account and convert it into gold or another metal. There are even certain coins that are eligible. The main thing to be aware of is that since precious metals are a long-term investment, the account should be maintained and no withdrawals made for at least five years (American Bullion). In the meantime, the gold is kept in a depository and in some cases can even be viewed by the account holder. When the account is distributed, the gold can either be converted into cash or sent directly to the owner.
A Gold IRA is an excellent option for those who want to be as certain as possible that the hard-earned money they contribute to their retirement account will hold its value against market fluctuations and inflation. Gold is a good investment and will be safe, secure, and easily transferable to cash. Besides, who wouldn’t want to say they have an investment as good as gold waiting for their Golden Years?
James Marion – University of Colorado, Boulder
“I am a junior majoring in finance and accounting at Leeds School of Business at the University of Colorado. I applied for the scholarship to help pay for tuition in upcoming semesters so that I have better chances of graduating college debt free. With this scholarship I will be able to reduce my work schedule and allocate more to studying and exploring beautiful Boulder. As a finance student, the scholarship’s prompt also educated me about Gold IRAs and their possible uses personally and as a financial advisor.”
An IRA is an individual retirement account that allows individuals to deposit money into an account that saves and invests their money and is taxed when it is withdrawn. It is advantageous to withdraw the money at retirement as the individual will likely be earning less and will therefore pay at a lower tax rate. Traditional IRAs, which usually invest in stocks, bonds, mutual funds, CDs etc., can be converted partially, or sometimes completely, into Gold IRAs tax free.
Gold IRAs were first approved by Congress in 1997 and are often met with uncertainty by new investors. This uncertainty arises from a lack of knowledge of what a gold IRA is and limited historical reference guide for the returns on gold IRAs. The lack of awareness can be changed through marketing efforts in both formal advertisements and beneficial press releases. Limited historical reference as a fear should be cautioned and quelled by financial advisors who are often taught not to look at past performance as a guide for future returns.
Gold IRA’s allow individuals to invest in gold, platinum, and palladium instead of owning paper based assets. The gold held by investors must pass a fineness test to ensure its quality and then is housed in an IRS approved depository by an IRA trustee. To set up a Gold IRA, individuals must establish a self-directed IRA which allows a wider range of investments. A broker is then needed to purchase the gold and a custodian to manage and store the gold. The gold then stays in a depository until it is withdrawn from the account where it can be taken by the investor as gold or converted into cash at the gold market rate.
Adding gold to a retirement account reduces risk because gold and paper assets traditionally are negatively correlated. Gold also hedges against the inflation of the dollar and its declining global power. Gold has been a precious, prized metal since early human history and was the base of the US dollar until the country was taken off the gold standard initially in 1933 by President Roosevelt and completely in 1971 by President Nixon. Investing in gold rather than a fiat currency protects against both smaller issues like inflation and catastrophes like depressions. Gold is valued worldwide and thus has store of value worldwide while paper currencies and paper investments can become worthless in significant economic downturns.
Gold also poses risks and opportunities costs. While unlikely, some fear gold could be stolen or never even bought. Gold is stored in secure depositories that must be insured, so in the case of a robbery, an individual’s gold will be protected up until the insurer’s stated value. The fear that the gold could never be bought and the cash invested into the IRA kept requires individuals to do due diligence and select a trustworthy company or individual to handle their money. Investing in a Gold IRA creates an opportunity cost of putting cash in a traditional IRA which carries more risk but also accompanying greater returns. The past returns on the S&P 500 for the last 30 years had a mean of 11.73% with a standard deviation of 17.07% while the change in the value of gold in the same time period was 5.13% with a standard deviation of 15.54%. Individuals over the last thirty years have gained more value on the S&P 500 but a Gold IRA should still be considered as a way to diversify retirement portfolios and hedge against risk particular to stocks, bonds, and other investments based off fiat currencies.
The views and opinions expressed in the above essays are those of the authors and do not necessarily reflect the views of American Bullion, Inc., its affiliates, or its employees. American Bullion does not guarantee the information’s accuracy or completeness, and does not recommend that the information serve as the basis of any investment decision.