Gold can be an attractive low-risk investment asset that can help diversify a retirement portfolio, but it’s essential that investors understand its risks before purchasing physical precious metals.
Investors looking to add gold to their IRA should work with an approved custodian and store the assets at an IRS-approved depository, in order to avoid incurring distribution taxes from the IRS.
Rules
Gold IRAs are self-directed retirement accounts that allow investors to invest in physical precious metals as well as various assets related to gold mining, including mutual funds devoted to this investment, futures contracts and stocks of companies operating within this industry.
Your Gold IRA options include traditional, Roth, SEP or SIMPLE accounts. However, each has different rules; for instance the IRS prohibits investing in life insurance policies, stocks of an S-corporation and certain collectibles. You could also utilize APMEX or Provident Metals as custodians that specialize in precious metals.
Your Gold IRA custodian will ensure the gold purchased in it is safely transferred to an approved storage depository, so you do not take physical possession of it yourself. Otherwise, the IRS could consider such storage an illegal distribution and impose stiff penalties against you.
Custodians
Custodians that specialize in gold IRAs exist. Since IRS rules restrict individual IRA holders from owning precious metals directly, these custodians facilitate transferring eligible bullion from an approved storage facility called a depository to your IRA account for safe keeping and management – for which fees will likely apply.
These custodians typically maintain relationships with various metal dealers across the country and can assist you in selecting pieces for your IRA from these dealers. Please keep in mind, however, that coins or bars will likely need to be researched independently by you before selecting.
Not only can these custodians charge one-time setup fees, but they may also levy annual asset, transaction, custody fees similar to what standard financial services firms charge for standard asset accounts. Furthermore, storage fees or any other costs that vary by company should also be clearly explained before investing – choose an organization with an excellent track record in transparency and customer service ratings as your partner in managing your funds.
Taxes
Gold in an IRA involves fees such as an account setup fee, annual account maintenance fee, seller markup on spot market price of metals sold through brokerage accounts, storage costs at an IRS-approved depository facility and cash out fees. Before opening one for yourself it is wise to carefully assess these costs against potential benefits of owning precious metals in an IRA.
Search for a company that does not charge additional fees, provides competitive pricing on purchases and repurchases, provides impartial education to their customers, and has an established customer service record. Be wary of companies using high-pressure sales tactics or offering excessive “free silver” when opening accounts – such offers could prove too good to be true and come at a cost! Investing in gold IRAs may not suit every investor; seek advice from financial and retirement experts when devising your strategy for investing gold IRAs.
Withdrawals
When withdrawing gold investments from an IRA, they must be sold through an authorized third-party dealer at its wholesale price – this means you could lose some of your investment if prices have increased since buying.
Physical gold investments may seem attractive as it offers the security that traditional retirement accounts cannot. Before investing, however, you should carefully assess any associated risks; gold can be costly and does not yield dividends or interest payments like stocks and mutual funds do.
If you want to diversify your IRA with precious metals, rather than investing directly in physical coins or bars, consider diversifying using other metals-focused investments, such as mutual funds or ETFs focused on gold, or investing in gold mining companies. That way you’ll still experience the peace of mind associated with physical gold ownership without jeopardizing its tax-deferred status.
