Many investors choose gold-backed IRAs to diversify their investment portfolio. Certain coins of gold, silver and platinum qualify as eligible investments when meeting certain purity and weight criteria.
IRAs don’t typically allow investors to invest in collectible assets, but the tax code has an exception for certain precious metals that fall within this category.
Investing in Gold
Physical precious metals such as gold can provide significant security and wealth protection to your retirement portfolio. Gold has proven its worth during times of economic uncertainty and for centuries has served as a store of value, acting as both an inflation hedge and store of value.
However, investing in real estate does have some drawbacks: It requires storage space and is less liquid than many other investments; furthermore it does not pay dividends and has more associated fees than traditional IRA investments.
If you decide to invest in gold, if choosing an IRA custodian that specializes in precious metals is key. They will ensure the metal meets IRS standards before accepting it into your account; these include NYMEX/COMEX bullion fabrication as well as proof coin specifications meeting certain specifications. Furthermore, storage and management fees may increase overall costs significantly.
Eligibility
People often mistakenly think proof gold coins can be added to an IRA; however, this is incorrect as the IRS strictly forbids this practice. Gold bullion does, however, meet purity standards and are therefore acceptable as an asset class in an IRA account if not considered collectibles.
Gold-backed IRAs must be opened with a custodian that specializes in these accounts as they must remain distinct from traditional IRAs and require different documentation and reporting regulations. Specialist custodians assist investors with organizing paperwork while helping with transaction and tax reporting while adhering to IRS requirements.
Gold investment offers multiple advantages when planning for retirement. Gold can act as a protection against inflation as its purchasing power decreases over time, as well as help accelerate wealth accumulation by raising the value of other investments. However, an IRA holding only gold increases risk.
Taxes
Gold coins can make for an excellent addition to a diverse investment portfolio, but they do have their drawbacks. Most importantly, they don’t provide the same tax advantages as traditional IRA assets and storing and insuring precious metals can be costly; liquidating an IRA may prove challenging; fees associated with gold IRAs may also be higher than with other accounts.
The IRS allows IRA holders to hold certain gold, silver and platinum coins and bullion that meet certain fineness standards and were produced by a recognized mint or refiner; additionally they must be legal tender. Some popular examples of eligible IRA coins include American Eagles, Canadian Maple Leaves and South African Krugerrands; however the IRS has considered certain minted coins collectibles and has issued rulings that a trustee must possess these collectibles to claim ownership – although McNulty v. Commissioner overruled this ruling however; therefore.
Fees
Many investors view gold as having an essential place in their retirement portfolios, yet should fully comprehend its associated risks before diving in. Precious metals carry fees that must be covered such as storage and insurance costs that quickly add up; also, the IRS limits what types of gold and silver may be placed into an IRA account.
Coins and bullion that qualify must meet minimum fineness requirements and come from either a national government mint, an approved refiner, assayer or manufacturer. Numismatic coins generally do not meet this criteria and therefore cannot be held in an IRA account.
Furthermore, investing in precious metals through an IRA could result in transaction and storage fees which will reduce your potential earnings from investment. Furthermore, unlike with traditional IRAs which offer tax-deferred growth potential when taken as distributions during retirement years; Roth IRAs allow tax-free growth.
