Can Gold Be Held in an IRA?
When investing in an IRA, there are various assets you can hold. Most investment professionals recommend creating a well-diversified portfolio comprised of both stocks and bonds to give yourself maximum returns.
But can gold be held in an IRA and how can one do so?
Taxes
Precious metals are considered alternative investments because they’re not traded on public exchanges and require specific knowledge for evaluation. Although often used as inflation hedges, precious metals don’t come without risk and could actually lose value as prices fall.
Gold IRAs may hold gold, but to qualify as an IRA-eligible retirement account and meet specific IRS regulations. A gold IRA must also be set up with a custodian that allows institution-to-institution transfers with special documentation meeting IRS guidelines.
As with other IRAs, gold IRAs may only contain physical precious metals certified at 99.5% purity or above, stored either segregated from other investors’ metal assets or pooled together in segregated storage or mixed together with investors’ metal assets. Furthermore, the fees charged by metal dealers, custodians and depository services for storage and insurance may add up over time and should ultimately be decided according to one’s investment plan, risk tolerance and financial goals.
Returns
Gold lacks dividends, interest or capital gains distributions to generate an income-generating potential that other investments in an IRA account do. Furthermore, precious metals IRAs tend to carry higher fees than conventional retirement assets in terms of storage charges, insurance premiums and management charges from their custodian.
Due to these considerations, gold IRAs should be seen as part of a more diversified retirement portfolio rather than as the primary investment strategy. Investors seeking exposure to this precious metal may wish to consider stocks of mining companies or an ETF; each investment comes with unique limitations and risks; for best results consult a financial expert regarding your unique circumstances and goals.
Storage
There are various storage solutions for gold held in an IRA. Certain companies will purchase precious metals on your behalf and store them in an IRS-approved depository; alternatively, providers offer their own storage facilities that may or may not be bonded and insured – it’s wise to compare fees prior to making your decision.
Some investors prefer keeping their gold at home, which can be risky. If the IRS detects you storing physical IRA assets at home, distribution penalties as high as 10% could apply – including potential fines of up to $1,000.
Physical gold must be stored in an IRA-compliant depository to meet IRS regulations, while allocated and commingled storage are the two options available to IRA investors for keeping precious metals secure. In the former instance, your precious metals would be mixed with assets owned by other custodians in one facility while with allocated storage, you would store your own gold individually in separate facilities.
Custodians
When hiring a custodian to store precious metals for your IRA, it is essential that you pay close attention to how long they have been in business and fees they charge. Furthermore, make sure they purchase physical precious metals that meet IRS purity and production standards for storage purposes only.
Search for a custodian that does not impose extraneous fees, such as those who add premiums to gold prices above spot market rates – effectively hiding fees that reduce returns.
Be mindful that only certain precious metals are eligible to be included in an IRA; JM Bullion provides a list of approved metals you can refer to for reference. You should also ensure all coins and bars conform to IRS rules before investing. Finally, always seek impartial advice from a fee-based financial planner prior to making decisions related to investing in gold IRAs or any other retirement assets.
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