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The IRS has announced that the average taxpayer will receive a refund of $3,116 for the 2024 tax year. If you’re one of those fortunate individuals, you may be wondering what to do with that money. **
Exploring Investment Options
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If you’re considering investing that cash, you’ve got plenty of options. Stocks, exchange-traded funds (ETFs) and mutual funds offer the potential to grow your money over time through market performance. However, these investments come with risks, and their performance can be volatile. Parking your money in a certificate of deposit (CD) or a high-yield savings account can be a safer, more traditional option. These accounts typically offer a fixed interest rate, providing a predictable return on your investment. **
Alternative Assets: Gold
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If you’re looking for an alternative asset, gold provides an interesting opportunity. The precious metal’s price has hit numerous historic highs in recent years and currently sits at $3,331.77 per ounce. Though its price is rising, it’s still not too late to use your tax refund to invest in the yellow metal. **
Types of Gold Investments
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There are multiple gold investing options to choose from. Two of these options could make particular sense for your tax refund now:
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- Gold IRAs
- Gold Bars and Coins
- Other Options
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• **Benefits: **
• Pre-tax contributions that reduce your tax liability in the year of contribution
• Diversification of your portfolio through gold’s value
• Inflation hedge to protect your retirement portfolio
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• **Benefits: **
• Liquidity: no restrictions on withdrawals
• Diversification: balance to your stocks and other investments
• Potential for long-term appreciation
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• Other gold investing options, such as gold mining stocks or gold mutual funds
• Consider consulting with a financial advisor to determine the best option for your individual needs and goals
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Gold IRAs: A Smart Choice
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A gold IRA allows you to buy gold through a self-directed IRA. This option provides three key benefits:
1. **Pre-tax contributions**: You can opt for pre-tax contributions that reduce your tax liability in the year you make your contributions. 2. **Gold diversification**: Your gold assets diversify your portfolio, as gold’s value typically doesn’t follow the ups and downs of stocks and bonds. 3. **Inflation hedge**: Adding gold to your retirement portfolio through an IRA provides a hedge against inflation. When inflation rises, gold’s value tends to rise, too, since investors buy it as a safe haven to protect themselves against the dollar losing its value and inflation-influenced market volatility. Gold’s role as a portfolio diversifier and inflation hedge is critical in the current economic environment. There’s a good deal of uncertainty surrounding the stock market and the economy, and inflation is higher than where the Federal Reserve would like it to be, even though it’s dropping. Those strengths play out over the long-term, too, which is why gold can serves a crucial role in keeping your retirement portfolio balanced. **
Gold Bars and Coins: A Liquid Option
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Gold bars and coins offer a great alternative to gold IRAs. Buying physical gold diversifies your investment portfolio, offering balance if your stocks and other market-based investments dip. During times of inflation, gold often maintains or increases in value as the dollar loses its value. One key benefit of buying physical gold is its liquidity. While gold IRAs have restrictions and penalties related to withdrawals, physical gold has no such restrictions. You can buy gold bars and coins through a retailer such as Costco or through a trusted gold dealer today and sell them with relative ease in the future. It’s essential to consider how you’ll store your physical gold and whether you want to purchase insurance for it. Both of these are recommended steps to protect your investment. **
The Bottom Line
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Gold is an ideal investment option for those looking to invest their tax refund right now. The metal’s hedging qualities and the portfolio diversification it offers are great benefits to have right now amid higher-than-desired inflation and uncertainty over where the economy is headed. Gold IRAs are a good vehicle for adding gold to your retirement portfolio, while buying gold bars or coins gives a more liquid way to invest in the precious metal.
