How much gold should you own at retirement? It is an important question to answer, but the truth can be complicated. You have to answer a lot of other questions first. For instance, do you plan on working until you are 65 or do you want to retire at 50 or at 40? Can you confidently explain what your ideal retirement looks like? If you don’t have those answers, then you should spend more time figuring them out. It is very difficult—if not impossible—to purchase the “correct” amount of gold for a poorly defined retirement.
To begin defining your retirement, use our Retirement Calculator. Then come right back here. We’ll wait for you…
There Is No Perfect Strategy
If you surveyed retirement professionals about how much gold their clients should own when they retired, you’re likely to get a wide range of answers. Most will probably say between 5% and 20% of your portfolio. There is no proven percentage and no matter which number you pick, it could be right today and wrong tomorrow. Market conditions change. Your life changes. Stop obsessing over the perfect strategy. Instead, be flexible. You can always adjust your portfolio down the road.
One wrong strategy is to wait and do nothing because you can’t figure out the perfect number. Imperfect action is still preferable to inaction. Another wrong strategy is to ignore all other asset classes and focus solely on precious metals. At American Bullion, we respect how useful gold can be. That means we respect its limitations as well.
Remember Why You Invest in Gold
Remember that your gold portfolio is not designed to deliver you consistent, predictable income during retirement. For all of its valuable qualities, gold can be challenging to budget around. No, you invest in gold because it offers diversification to traditional asset classes. Why do many retirement portfolios offer a 60% stock or 40% bond split? Because stocks and bonds tend to move in opposite directions—they hedge for each other. Gold is a hedge for both stocks and bonds.
You may also invest in gold to protect against inflation. You might invest in gold because you just know, at a gut level, that it’s valuable. Or because gold has a track record that goes back at least 5,000 years.
Questions to Ask Yourself
Here is a short list of questions you should be able to answer before targeting how much gold to own at retirement:
- How important will liquidity be in my retirement?
- Is my portfolio diverse enough to survive swings in gold prices?
- What are my projected costs for gold storage and security?
- How concerning are geopolitical or economic affairs?
- Where are my retirement earnings going to come from?
- Do I want to sell my equities as I age?
What History Tells Us
Let’s suppose you’re 50 years old now and want to retire before you are 65. You have a decade-and-a-half to manage your portfolio. A lot can happen in 15 years. Consider how different the market (and the world) was in 2015 from 2000 or 2000 from 1985. The future is defined by uncertainty, but history does give us some clues. For instance, we can predict rising government debt and spending. There is 100 years of evidence to suggest that Washington D.C. can’t get its act together. We know central bankers will make mistakes, the value of the dollar will continue to drop, and some stock market bubbles will probably burst. And we know gold (and silver) will still have value.
How to Estimate How Much Gold to Own
Let’s say you have focused in on your liquidity needs, identified potential weak spots in your portfolio, projected your cost of living in retirement, and taken the temperature of the global economy. That’s great. You may not have a number in mind, such as 5% or 10%, but you may have a sense about your own retirement readiness. At an instinctual level, you’ll just sort of know that you either own enough gold or that you don’t. Preparedness for retirement is not determined on a calculator. The calculator is a tool for manipulating or expressing numbers. It can’t “tell you” if you have enough assets—or gold.
Psychologically, you must be willing to make the right decision about gold for you. For your family. For your retirement. For your own piece of mind. You must also have the willingness to listen to your own instincts. Gold is a hedge against financial uncertainty, yes, but it is just as importantly a hedge against emotional uncertainty.
So ask yourself a few honest questions: do you know enough about your retirement needs? Do you have enough precious metals in your portfolio today? Will you have enough by the time you retire? If you need help with the process, we’re always here to help. Our #1 goal is for you to take control of your own finances – and we promise to be transparent, safe, and efficient in the process.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.