Gold IRAs offer investors diversification, economic protection and inflation hedge benefits; however, physical gold may also present certain potential drawbacks that should be taken into consideration before opening an IRA account.
Precious metals don’t generate cash flows and must adhere to IRS standards of storage and purity for optimal returns. Custodians and dealers also charge fees that could reduce returns, further diminishing returns.
Taxes
Gains made from gold investments held within your IRA are subject to taxes at the same rate as any other investments, usually when cashing out or taking distributions from them.
Physical gold investments may be purchased within an IRA through an authorized gold IRA company, while indirect gold investments, like mutual funds or futures ETFs may also be an option. Any such indirect gold investments could potentially fall under UBTI rules (unrelated business taxable income), which require taxation at the ordinary income rate.
Hold gold in your IRA by taking an “in-kind” distribution, which requires having physical gold shipped directly to you. However, this method may be expensive as you’ll likely incur storage and insurance fees, plus an IRA company buyback fee when liquidating your holdings – so consult a financial advisor or tax professional for guidance in how best to minimize taxation of this form of gold investment.
Fees
Gold may be more costly than other investments available through an IRA, but it can provide your portfolio with diversification benefits while potentially acting as a hedge against inflation. Unfortunately, though, gold doesn’t generate cash flows or pay dividends like other investments do so it should be treated more as an long-term play requiring careful planning and an “buy and hold” strategy in order to generate positive returns over time.
If you’re interested in purchasing physical metals, make sure that the company you work with is legitimate and has all of the appropriate licenses, registrations, insurances and bonds. Some offer additional services like price-match guarantees or 24 hour risk-free periods where customers can consider their purchase before taking a risk free option; others even provide online portfolio tracking as additional benefits.
When purchasing metals for an IRA, always inquire with your Broker regarding which premium is lowest over current spot price of Gold. This will maximize your return on investment and most Gold IRA companies have specialists to guide and assist throughout this process.
Liquidity
Roth IRAs provide multiple savings vehicles with tax-deferred savings options, including mutual funds, stocks, bonds, ETFs (exchange-traded funds), certificates of deposit (CDs) and money market funds.
Roth IRA withdrawals are tax-free as long as certain conditions are fulfilled. This may include seasoning a five year account for at least five years before taking withdrawals, reaching age 59-1/2 or satisfying other justifications such as being disabled or purchasing your first home.
Self-Directed Roth IRAs give investors access to alternative assets like gold or real estate for investment. This option may appeal to those with in-depth market knowledge who see long-term growth potential in such investments; however, liquidity concerns could make this more challenging than investing in traditional IRAs; liquid assets may take time to convert to cash.
Investing
Gold IRAs are individual retirement accounts that enable investors to invest in physical precious metals tax-deferred until withdrawal, similar to traditional and Roth IRAs, subject to contributions limits and penalties for early withdrawal.
Gold can be an excellent way to diversify your retirement portfolio, hedge against inflation, and build wealth; however, you should fully understand its associated risks and costs before investing.
Working with a reliable gold IRA company will allow you to quickly establish and fund an IRA account. They work with precious metal dealers and custodians who ensure compliance with IRS regulations as well as secure storage. Look for one with an A+ Better Business Bureau rating as well as excellent customer reviews as well as low premiums above spot price for Gold.
