Thanks to a Tax Code exemption, Individual Retirement Accounts (IRAs) are now allowed to invest in physical gold coins and bullion through self-directed IRAs, with additional fees such as one-time account setup costs, annual maintenance charges and storage/insurance costs associated with ownership of physical bullion assets.
Should you sell prior to turning 59.5 years of age, income tax and a 10% penalty will need to be paid.
Taxes
As with other investments held within an IRA, gains on metals sold after retirement are subject to tax at their regular income-tax rates, with distributions before age 59 1/2 subject to a 10% early withdrawal penalty.
Gold doesn’t pay dividends, but its price can increase due to macroeconomic considerations and supply-and-demand principles. Gold also serves as a hedge against inflation – something cash savings accounts lose over time.
As with any retirement account, gold IRAs require annual custodian maintenance fees and storage fees, similar to any retirement account. Fortunately, many precious metals IRA companies offer these services at competitive prices, including your investment costs in metal. You may also incur a seller markup or commission fee depending on current market conditions and type of precious metal purchased; in addition to any IRA setup fees typically charged when opening new accounts – be sure to carefully consider all charges prior to making your final decision.
Security
Though precious metals may appear as an attractive investment during times of economic distress, they do pose risks – for instance, gold-backed IRAs can still be stolen.
As damage can occur during storage or transportation, it is vital that a company offer secure facilities and insurance. Furthermore, precious metals-backed IRAs typically require higher annual maintenance fees compared to traditional ones; these costs include account setup fees, annual maintenance fees, seller markup costs, broker commissions, storage costs and cash-out costs.
To avoid fees, it is wise to work with an established dealer with years of industry experience and affiliations with respected trade organizations. Also, as the IRS restricts which coins can be added to an IRA, make sure your chosen dealer provides products eligible for inclusion into your plan – in addition, only purchase from licensed and insured dealers.
Stability
Gold has long been an appealing investment option due to its ability to both hedge against inflation and preserve wealth over the long-term. Furthermore, unlike paper assets like stocks and bonds, its value remains consistent during economic uncertainty.
If you want to add physical precious metals to your IRA, it is essential that you work with a company that can provide all necessary paperwork and help choose an approved depository for them. They should also be licensed to sell and store whatever type of metals are being purchased, with proven experience providing safe storage solutions.
Find a company with transparent fees. Visit their website and look for a list of their fees; if necessary, ask questions if the information isn’t there. Fees will depend on factors like the type of metal purchased, storage costs and markup; any reliable company should outline these charges upfront so as to help make an informed decision about investing.
Liquidity
Investors with an IRA who invest in gold coins or bullion must liquidate their assets through the company that holds them, typically selling at market prices, which may be lower than what was paid for them.
These prices often include storage fees and sales markup costs that quickly add up and can reduce potential returns from investing.
IRS rules mandate that precious metals held within an IRA be stored with an authorized custodian, such as banks, federally insured credit unions, savings and loan associations or federally chartered companies authorized to act as trustee or custodian – according to Midas Gold Group.
Some IRA companies offer buyback programs, allowing you to close out your IRA and receive money back from any gold they hold for you. Unfortunately, this method of liquidating investments remains costly; you could lose out financially if prices have increased since purchasing gold.
