IRAs can hold paper assets such as stocks, bonds and mutual funds that you’d like to withdraw tax-deferred between age 59 1/2 and beyond.
IRS rules regarding IRAs prohibit them from holding certain types of precious metals such as gold coins and bullion products, so you should choose an IRA custodian who possesses experience dealing with physical precious metals.
Precious Metals IRAs
Precious metals IRAs typically enjoy similar tax benefits as traditional IRAs. Your contributions may qualify for tax deductions depending on your tax bracket, while any distributions won’t be taxed until they’re taken out. Furthermore, according to Journal of Accountancy analysis a precious metals IRA could offer “significantly higher after-tax rates of return than traditional IRA investments”.
Physical metals differ significantly from paper assets like stocks and cash. Experts agree that physical metals offer an ideal way to diversify a retirement portfolio because they can maintain or even increase purchasing power during times of inflation.
To invest in precious metals, first you will need to open a self-directed individual retirement account (SDIRA). Next, find a reputable dealer with competitive pricing who will buy back your precious metals when liquidating – make sure your chosen dealer does not charge extra fees and has proven track records of excellent customer service.
Self-Directed IRAs
Precious metals should play an integral part of an IRA portfolio, but should not be its only asset class. After all, precious metals do not provide interest or dividends and investing solely in gold would leave your retirement portfolio without the essential diversification that ensures long-term investment success.
As with any financial account, self-directed IRAs come with their own set of fees. Custodian fees and transaction costs should be taken into consideration; for more specialized sectors–like real estate and cryptocurrency investments–there may also be extra costs you need to account for.
Be wary of dealers that attempt to conceal or misrepresent charges. Consider dealer longevity, BBB ratings and membership in industry groups like the Professional Nuismatists Guild or American Nuismatic Association as safeguards against deceptive practices. Furthermore, always carefully consider all costs associated with your purchase – initial investment cost plus storage and insurance fees should never exceed what can be afforded at the same time a profitable return could be generated later on.
Traditional IRAs
Precious metals can make an excellent addition to a retirement portfolio, but should not form the bulk of it. Precious metals investments aren’t as liquid as stocks or mutual funds and are vulnerable to inflation; while their gains tend to spike during times of economic distress. Gold IRAs can be more costly as they require purchasing and storing physical precious metals – plus any “in-kind” distributions will incur taxes from companies which owe you for these physical precious metals when shipped directly.
Gold IRAs, like traditional IRAs, hold physical metals such as coins or bars; however, they also allow investors to invest in precious metal commodity futures or shares of mining companies. Withdrawals from precious metals IRAs are subject to income taxes as ordinary income and any withdrawals before age 59 1/2 may incur penalties fees.
Roth IRAs
Gold and precious metals may not be an appropriate retirement savings solution for everyone; adding them to an IRA may provide some economic protection; however, such assets should represent only a small part of your overall portfolio.
Addition of metals to your retirement account requires working with a precious-metal dealer and custodian that are equipped to purchase and store coins that meet IRS minimum fineness requirements for storage in their original packaging – which adds both cost and security benefits for this investment.
Investors must carefully consider the fees associated with precious metals IRAs. Fees associated with buying and holding precious metals tend to be higher than traditional investments like stocks or bonds; investors should factor in storage and insurance costs as well. Furthermore, any withdrawals before age 59 1/2 may incur taxes.
