Gold and other precious metals may not be suitable investments for everyone, but for some they offer an effective way to diversify retirement savings.
An individual retirement account (IRA) allows you to invest in physical gold and other alternative assets using self-directed investing techniques. When setting up an IRA, make sure it’s custodied by someone experienced with managing such accounts.
Taxes
Investors frequently turn to gold IRAs in an effort to diversify their retirement portfolio, as the precious metal provides a reliable store of value and can help combat inflation. However, investors should bear in mind the fees associated with gold IRAs before making their investment decision.
Additionally, the IRS sets rules regarding what physical precious metals can be deposited into a gold IRA. For it to qualify as such, precious metals must be delivered directly from their dealer to their depository and meet certain fineness standards; collectible coins such as American Gold Eagle bullion coins are excluded as are certain other kinds of metals.
At the time of withdrawal from their gold IRAs, when withdrawing they must pay income taxes at their current tax rate. Furthermore, investors should consider whether liquidating before turning 70 1/2 or 72 could incur a 10% early withdrawal penalty fee.
Fees
Gold and other precious metals don’t tend to generate returns like stocks and bonds do, but they can add diversification to your retirement portfolio. You should keep fees for investing in gold IRAs in mind; such as sales commission when purchasing physical metal; setup/management fees from custodian; storage or depository fees etc.
These fees can quickly add up if you invest in multiple precious metals IRAs with multiple dealers and custodians, so the ideal scenario would be working with one offering low or no commissions while providing secure storage at no additional costs.
Once you decide to cash out your gold IRA and sell back to the dealer who originally purchased your metals from you, there may be closing costs involved in doing so. These dealers may offer less than market price for each metal purchased back from you – this could result in losses for you.
Eligibility
The IRS lays out specific funding requirements for precious metals IRAs, with investments made through a qualified precious metals dealer and custodian required. Both services should charge fees for their services – this should be factored into total spending plans as the price of precious metals determines appreciation over time.
Gold products eligible for inclusion in an IRA must meet several criteria, including being manufactured at a government mint and having a specific fineness or weight. Furthermore, coins must remain unaltered and unencapsulated before being stored at one of the vaults approved by the IRS for safekeeping.
Addition of precious metals to an IRA is an innovative way to diversify a portfolio and protect against inflation. But investors must keep in mind that precious metals IRAs do not come without risk, and can lose value. Investors should seek the advice of a financial advisor in order to strategize and implement their investment plans before considering investing in precious metals IRAs.
Withdrawals
Gold IRAs tend to incur greater maintenance costs than traditional retirement accounts because physical precious metals require storage and insurance, transaction fees, seller markup fees, as well as opening/closing account fees that vary based on vendor. Furthermore, investors incur fees when opening and closing an account which can become quite high should you plan to liquidate soon after opening it.
Gold IRAs can be an excellent way to diversify your investments, but it’s essential that you fully understand their risks before deciding to open one. Precious metals don’t provide dividends or interest payments and their prices can fluctuate wildly; furthermore, traditional IRAs don’t provide tax benefits compared to gold IRAs and withdrawal may incur taxes upon withdrawal.
Finalizing your selection is key when opening an IRA with physical precious metal investments, although not all self-directed IRA custodians do. Be sure to select an established and trustworthy custodian.
