When you put your savings in a gold investment retirement account, you’re turning part of your retirement nest egg into gold.
Still, is making a gold IRA part of your portfolio the right move for you?
While not all IRA accounts allow you to invest in gold, this post will help you understand what to look for in an IRA to determine if it allows you to build a golden retirement nest.
Table of Contents
The Golden Rules
For starters, a gold IRA can either be a Roth or traditional. Whichever option, you can only use gold IRAs to invest in physical gold, be it bullion or coins.
You’ll want to consider whether you want to include a physical investment in your portfolio instead of a gold-stock, exchange-traded funds (EFTs), or mutual fund.
If you opt for precious metals, you must gold for a gold company dealing with IRS-approved coins and bars. On top of that, an IRA trustee must hold the hold and not the IRA owner. So, ensure the gold IRA provider you’re dealing with can store your gold in an IRS-approved depository.
Simply, when it comes to investing in gold via an IRA company, there’s no stashing your bullion in closets, home safes, or safety deposit boxes.
However, all other regulations regarding disbursements, IRA contributions, and taxes apply.
Finding a Broker or Custodian
To invest IRA funds into physical gold, you must open a self-directed IRA account.
You’ll manage the account directly and are allowed to invest in other products like silver, palladium, and platinum.
You need a broker to purchase the gold on your behalf and a custodian to create and administer your account. The custodian will store and hold your bullion.
Custodians are usually savings and loan associations, brokerage firms, credit unions, trust companies, and banks.
Further, federal and state agencies must approve the custodians to offer custody services to financial advisors and individual investors.
It is worth noting that the custodian doesn’t choose the metals for you. However, experienced custodians may help you decide which precious metals are worth buying.
Picking the right custodian or broker can be challenging. Here’s what to look for in a good gold IRA company or custodian:
Transparency
You’ll want to deal with a broker that lays bare all your upfront costs. This way, there’ll be no unpleasant surprises, such as hidden fees after investing.
A Good Track Record
Choose a company with an excellent reputation. You can check third-party platforms like Business Consumer Alliance and Better Business Bureau. In addition, find out what customers say about the brokers, more the negative feedback.
Flexibility
Your needs and goals are unique, so you’ll want to trade with a company that’s flexible enough to meet them.
Qualifications
The best gold IRA company has all the appropriate and required registrations, licenses, bonds, and insurance to safeguard your investment.
Request for verifications of these licenses and other information.
Special Costs
Operating a gold IRA account comes with special expenses and chargers, including:
The Seller’s Fee
While gold has a going rate, expect to incur certain markups depending on whether you want to buy gold coins, proofs, or bullion.
The markup can vary based on the vendor, but it is typically a one-time fee. Also, each form of gold has its selling requirements.
Retirement Account Setup
Again, this one-time fee is charged when you open a new IRA account. The fee may vary from one institution to another.
Storage Fees
You’ll need to pay a qualified storage facility to hold your gold. The storage fee is paid once per year. Some gold IRA companies cover these fees for clients for the first few years.
Custodian Fees
While custodian fees are paid once every year with all IRAs, they’ll be relatively high for gold IRA accounts, especially if you’re dealing with a different institution than the one holding your other accounts.
Cash-out Costs
If you want to sell your gold to a third-party dealer and close your account, the said dealer will want to pay less than the current open market rates. So, unless gold prices have increased significantly since you bought, you stand to lose a chunk of your initial investment.
While some IRA providers can offer to buy back the gold from you at a wholesale price, you could still lose money by closing your account, which doesn’t happen with traditional IRAs.
Benefits of Gold IRAs
Now that you know how to choose a gold IRA company and the fees you’re likely to encounter, the question becomes—is operating a self-directed IRA account worth the effort?
Yes, it is. Here’s why:
Tax Benefits
Gold IRAs come with the same special tax benefits as traditional IRAs. Contributions made to a standard self-directed IRA are tax-deductible. The same applies to qualified withdrawals from a gold IRA.
Long Term Hold
Gold coins and bars aren’t very liquid, and so are gold IRA holdings. Because investing in gold is a long-term strategy, you’ll be better off buying it via an IRA, whose assets you don’t intend to touch for years, typically until you retire.
Greater Control
As stated, gold IRAs are self-directed. Essentially, you’re free to manage your holding and make all the investment decisions.
The Financial Takeaway
Gold IRAs are perceived as alternative investments because they aren’t traded on a public exchange. Besides, they require special expertise to value.
Sure, gold has high return potential. However, it is easy for an investor to be blinded by its glitter.
It is important to remember that gold prices can suddenly plummet.
So, while investing your savings in a gold IRA is a noble idea, be sure to work with a financial advisor to help you decide which metal aligns with the overall goals of your portfolio.
If gold is a good investment for you, financial advisors suggest putting no more than 30% of your retirement funds into a gold IRA, depending on your goals.
Most experts recommend having no more than 10 to 15% of your total portfolio invested in gold, whether in paper form — which isn’t allowed in a gold IRA, by the way — or physical holdings.
As the famous saying goes “don’t put all your eggs in one basket.”
