Individual Retirement Accounts (IRAs) can be an excellent way to save for the future and act as an investment vehicle, enabling you to invest in multiple assets including precious metals.
When investing in physical gold through an IRA, there are a variety of considerations. Continue reading to gain more insight into this unique option:
Taxes
Physical gold is widely valued and serves as an economic security blanket, yet can be costly to purchase and store, necessitating dealer commissions, sales taxes in certain cases, storage fees and security considerations.
Gold ETFs provide investors with exposure to precious metals without incurring extra costs related to manufacturing, storage and insurance costs. Plus, these investment vehicles can be more easily sold through your brokerage account than physical gold would be.
As with any investment, research your options carefully to select the one best suited to your financial situation. If adding gold to your IRA portfolio is an option for you, speak with an accredited financial advisor who can develop an individual plan tailored just to you – and don’t forget our free gold investor kit today – don’t delay.
Investing
If you decide to invest in physical gold, the first step should be locating a dealer who sells items eligible for your IRA account – coins, bars or medals must meet IRS purity standards and pass quality inspection. In addition, you must select a custodian and depository to hold your assets – both charge fees so it is essential that you understand all costs related to investing before making your final commitment.
Physical precious metals may not be as liquid as paper investments like stocks and ETFs, making selling them quickly or easily more challenging than investing in paper investments such as stocks or ETFs. Therefore, you should carefully assess their advantages and disadvantages against your personal goals and financial circumstances before making a decision to invest in physical gold.
As an example, you should decide if you want direct ownership of your precious metals (allocated) or prefer pooled accounts that hold only record of an unallocated sum (unallocated). Allocated accounts tend to be more convenient but come with additional storage and insurance costs.
Storage
The IRS strictly forbids home storage of gold and other precious metals held within an IRA, as per federal law a custodian must store your assets safely. Many people use safes or safety deposit boxes; however, according to IRS requirements this does not fulfill their necessary duties as an IRA custodian; should someone gain entry and steal all your gold from these storage systems, or should their company fail, you could lose everything you invested.
Your investing goals and financial situation will dictate which plan best meets your needs, with assistance from a financial professional to choose the plan that is tailored specifically to you. Rules for withdrawals follow those of traditional pretax IRAs with required minimum distributions at age 70.5 or 72 (depending on when you were born); however, with RMDs often necessitating selling precious metals thus decreasing overall value of investments.
Withdrawals
Gold can serve as an anti-inflationary asset and diversify retirement portfolios; however, investors must carefully consider this investment against their goals and overall strategy before making their decision.
Consider additional costs associated with physical precious metals IRAs before opening one, such as an initial fee to open your IRA account, annual custodian fees (which may be lower for self-directed IRAs), and storage fees.
Furthermore, it is essential to remember that precious metals IRAs fall under the same rules as mainstream IRAs, meaning you still must take required minimum distributions (RMD) at age 72. Furthermore, investing in gold may involve greater risks due to its increased volatility – making it suitable as a hedge against market instability but not an income source in itself.