Many people use precious metals as an asset diversification strategy in their retirement portfolios, holding them in traditional pretax IRAs, Roth IRAs or SEP-IRAs to diversify them further. All three account types follow similar rules; there may be contribution limits and penalties of 10% upon withdrawals before age 59 1/2 as well as minimum distribution requirements at age 73.
Buying Gold
Gold IRAs’ biggest draw is owning physical precious metals; however, this comes at a cost – sometimes passed along to investors through storage or insurance fees.
Gold IRA companies don’t always provide clear details regarding their fees, so it’s wise to conduct your own research before making your investment decision.
Gold IRAs can either be traditional or Roth, and abide by the same rules as any self-directed retirement account, including contribution limits, penalties for early withdrawals and required minimum distributions at age 73. You are only permitted to hold precious metals that meet certain purity standards in an IRA account; alternatively you could invest in gold mining stocks through your traditional or Roth IRA or buy ETFs that track gold prices or precious metal prices.
Funding Your Gold IRA
Gold has long been seen as an effective investment to protect against inflation and market instability, serving as a great diversifier since it doesn’t correlate with stocks and bonds; adding gold can therefore significantly bolster portfolio performance.
Gold Individual Retirement Accounts (IRAs) operate similarly to pretax or Roth IRAs in terms of contributions, withdrawals and penalties imposed by the IRS. You can open one via a precious metals dealer and/or custodian/depository.
These companies typically charge one-time setup fees and ongoing service charges to insure, store, and secure precious metals. When selling back your metals they may also require a markup payment from you.
If you plan to transfer funds from existing retirement accounts, ensure the company you work with possesses all of the required licenses, registrations and insurances to protect your investment. Furthermore, ask about which custodian and depository will affect the overall investment cost.
Purchasing Your Metals
A self-directed IRA allows you to work directly with a precious metals dealer and your custodian to buy gold bullion bars or coins that meet IRS purity standards, keeping in mind that taking direct possession before depositing them would constitute a prohibited transaction and may incur taxes and penalties.
Once you have identified an approved metal to invest in, your custodian will purchase them using funds from your IRA account and store them at an IRS-approved depository.
Most gold IRA providers charge fees for account maintenance, storage and insurance – fees which can quickly add up over time. Some providers also provide online dashboards which let you monitor investment performance; it would be wise to inquire whether this feature is offered before opening an account with any particular provider.
Monitoring Your Metals
Setting up and managing a precious metals IRA usually takes more time and work than setting up and managing traditional IRAs, due to the physical metals requiring three parties – such as a gold dealer, an IRA custodian, and depository for holding your assets – working in harmony. According to certified financial planners these arrangements may incur fees that add up over time.
Metals accepted into an Individual Retirement Account must meet certain purity and manufacturing standards; you cannot store collectible coins or impure bars in your account. The same holds true for other metals like silver and platinum.
Home storage of gold is prohibited and counts as a taxable withdrawal when closing an account. Furthermore, third-party dealers typically offer less than market price when purchasing metals from you for sale – potentially jeopardizing much of your investment and necessitating diversification of precious metals holdings into other asset classes.
