Gold and Your Retirement: Myths You Need to Stop Believing

If you tune into talk radio or watch certain political TV channels, you’ll probably hear or see several commercials touting the various forms of gold ownership.  The ads often use actors or game show hosts urging you to buy gold as a hedge against inflation. 

They highlight how gold’s price has surged from $260 an ounce in April 2001 to around $2,430 an ounce today.  Some ads go even further, stirring fear with predictions of global catastrophe and economic collapse and claiming that precious metals are the only secure investment. Unfortunately, these are often the same companies that scam customers, charging two, three, or even four times the actual value of the gold and silver they sell.

Holding tangible assets can be appealing, especially when there is an increasing fear of a recession. However, as Christian Cyr, CPA and president of Cyr Financial Wealth Advisors, explains in his podcast, “Retirement for Life,” physical gold as a reliable safeguard for retirement is more myth than reality.

Watch our podcast, “Debunking Gold Myths: Why Physical Gold Isn’t the Answer for Retirement Fears”

The Myth of Gold as a Safe Haven

Gold symbolizes wealth and security, dating back thousands of years. In times of economic uncertainty, it’s not uncommon for people to flock to gold, seeing it as a stable and reliable store of value. However, the belief that gold can protect you in every possible economic scenario is flawed. 

As a retirement planning expert, Cyr emphasizes that while gold can be part of a diversified investment strategy, relying on it solely, especially in a physical form (versus a certificate), may not be in your best interests. Following are a few reasons why.

1. People buy physical gold because they are concerned about a doomsday scenario where traditional securities markets decline or collapse. They believe gold in all its forms will become the ultimate currency in a world impacted by inflation, recession, and depression. However, this line of thinking is irrational and impractical for several valid reasons.

Think about life in a doomsday scenario—where a gold bar or coin may be used to buy goods and services.  On the other hand, real assets could be necessities like food, water, utilities, and shelter. All are far more valuable than shiny metal because they satisfy an immediate need.

The point is that in a world where traditional currency has lost value, survival skills, essential goods, and possibly firearms would be far more useful than gold. The idea that gold will save you in a world without order is a fantasy.

Converting Dollars Into Gold

The U.S. officially stopped using the gold standard in 1971, during President Richard M. Nixon’s administration. This move is often referred to as the “Nixon Shock.”

Several economic and geopolitical factors drove the decision to end the gold standard.

During the post-World War II era, the U.S. experienced significant trade imbalances. As the U.S. ran trade deficits, other countries increasingly demanded gold in exchange for U.S. dollars, depleting U.S. gold reserves.

In the 1960s and early 1970s, there was growing concern that the U.S. could not maintain the fixed exchange rate of $35 per ounce of gold due to the large volume of dollars held by foreign governments. Countries like France began converting their dollars into gold, creating a run on U.S. gold reserves.

The U.S. was also facing inflationary pressures, partly due to the costs of the Vietnam War and domestic social programs. The gold standard limited the government’s ability to print money to finance these expenses, leading to economic difficulties.

By abandoning the gold standard, the U.S. could implement more flexible monetary policies, allowing the Federal Reserve to control the money supply and interest rates to manage inflation and economic growth better.

On August 15, 1971, Nixon announced the suspension of the convertibility of the U.S. dollar into gold, effectively ending the Bretton Woods system of fixed exchange rates. This marked the beginning of the modern era of fiat currency, where the value of money is not tied to any physical commodity.

The Reality of Black Swan Events

Many fears about the future stem from the possibility of Black Swan events, which are typically unpredictable, high-impact events like the financial crisis 2008 or the COVID-19 pandemic. 

These events can have significant effects on the markets and the economy. However, after every market crash, the market eventually recovers, often reaching new highs in securities prices.

For instance, during the COVID-19 pandemic, the stock market initially plummeted by 30% in 30 days, causing widespread panic. Driven by fear, many investors pulled their money out of stocks, missing out on one of the strongest market recoveries in history. Those who stayed the course, trusting their diversified investment strategies, saw their portfolios recover and grow.

The lesson here is that while it’s natural to be concerned about Black Swan events, overreacting by making drastic, emotion-backed changes to your investment strategy—like converting everything into physical gold or CDs—can lead to missed opportunities and long-term financial setbacks.  Working with a team of retirement planners can help you avoid making irrational decisions during periods of extended market volatility. 

Concerned about protecting your assets?  Watch our podcast on “Trusts 101: Protecting Your Assets and Planning Ahead”

Why Physical Gold Isn’t the Answer

We are not arguing against owning gold entirely; instead, we offer that owning a small percentage of gold within a diversified portfolio can be beneficial as a hedge against inflation.  However, there are several important reasons why you should not hold physical gold as your primary retirement planning strategy:

• Lack of Liquidity: Physical gold can be difficult to sell quickly, especially in large quantities. Finding the right buyer willing to pay a fair price in a crisis can be challenging when there are more sellers than buyers.
• Storage and Security: Keeping physical gold safe requires secure storage, which can be costly and cumbersome. There’s always a risk of theft, loss, or damage.
• No Income Generation: Unlike stocks, bonds, or real estate, physical gold doesn’t generate income. It doesn’t pay dividends or interest, and its value is purely speculative.
• Market Volatility: Gold prices can be highly volatile, influenced by global economic conditions, geopolitical tensions, and investor sentiment. This volatility can harm you if you’re nearing retirement and need increased stability and income.
• Tax Considerations: Selling physical gold can trigger capital gains taxes, and those taxes could be substantial depending on the situation. Additionally, the cost basis for gold can be complicated to track over time, especially if you’ve made multiple purchases over an extended period.  

This is why it’s so important to your financial well-being that you work with a fiduciary financial advisor who has a CPA background and specializes in tax planning.  

A Better Approach to Retirement Planning

At Cyr Financial, we recommend a more rational, diversified approach to retirement planning. Instead of focusing on a single asset like gold, we recommend building a robust retirement plan with diversified investments tailored to your needs and risk tolerance. 

This might include stocks, bonds, real estate, and other assets that can provide income and growth over the long term.

The right fiduciary financial advisor can help you navigate market fluctuations, changes in the tax code, and income planning, ensuring you’re prepared for whatever the future holds—without resorting to extreme measures like hoarding gold.

Think Long-Term, Not Doomsday

The right financial advisor can make all the difference when planning your retirement. Cyr Financial takes a personalized approach to retirement planning, ensuring that your unique needs and goals are always our number one priority. 

With a commitment to always be fully transparent, our fiduciary duty is to always act in your best interest.  Whether you’re just getting started or fine-tuning your existing strategy, Cyr Financial is ready to support you every step.

Ready to learn more about our retirement planning services?  Connect with us.