Can I Buy Gold With My Self-Directed IRA?
Gold has long been considered an effective hedge against inflation. One way many investors invest in gold is via a self-directed IRA (commonly referred to as precious metals IRA).
This type of retirement account permits investors to invest in alternative assets such as precious metals and real estate, among others. Examples of IRA-eligible gold include coins and bars with a fineness rating of 995.5 or greater.
Investment of precious metals through a self-directed retirement account requires knowledge of tax laws. When opening a gold IRA, an individual must select a custodian, purchase approved precious metals from an IRA depository, and store them there with fees levied by each custodian including one-time account setup fees, annual maintenance fees, seller’s markup (indicative of how much gold will sell for in terms of storage fees and closing costs).
While traditional IRAs and 401(k) accounts limit what investments an investor can make, self-directed IRAs allow investors to invest in any asset type imaginable – including precious metals. According to IRS definition, precious metals include bullion which consists of precious metal pieces shaped into coins or bars or coated with another precious metal. They may be stored either segregated or allocated – although commingled storage may provide easier liquidity access – depending on your investment strategy and storage preferences.
Self-directed IRAs allow investors to invest in an assortment of assets – from physical precious metals to other securities and more – beyond traditional retirement accounts such as Roth, SEP or traditional IRAs. When selecting the custodian for your self-directed IRA, make sure it’s one regulated by the IRS with an excellent track record, can help locate reliable precious metal dealers near home, store the bullion safely in an insured third-party vault nearby and offers customer service support.
Remember that gold IRAs don’t pay any dividends or yield, with profits accruing solely through price appreciation of bullion. Therefore, it is crucial that you conduct thorough research and choose an honest dealer; established custodians usually have relationships with several hundred dealers nationwide and will happily share a list. Furthermore, you will want to establish one-time setup fees, annual maintenance and storage costs before investing your retirement savings in one.
Purchase physical precious metals through an IRA involves creating a self-directed gold IRA, funding it with either transfers from another custodian or rollovers from retirement funds, and then using those funds to buy eligible precious metals from a dealer before having it stored securely by your custodian.
IRS considers gold to be a collectible and, generally speaking, IRAs do not permit owning collectibles. There are however exceptions to this rule for precious metals like bullion and coins that have been approved as eligible investments by an approved seller and considered eligible investments within an IRA.
An individual Retirement Account, also known as an Individual Retirement Account (IRA), requires various fees such as setup and maintenance charges, storage charges paid directly to an approved depository, and sales costs (which you pay directly). These costs are similar to any other IRA but tend to be higher for gold IRAs.
Traditional, Roth, SEP and 401(k) accounts all allow investors to purchase paper assets; self-directed IRAs allow you to invest in alternative investments such as physical precious metals – bullion bars or coins will need to come from a dealer offering eligible precious metals as part of an IRA account.
Your precious metals must also be stored safely with an authorized custodian, either as commingled storage (where your precious metals will be mixed in with those of other investors) or allocated storage where your bullion can be clearly labeled and assigned solely to you.
Gold investments require patience, as its prices can quickly fluctuate, potentially diminishing returns and creating risky situations for some investors with short-term goals. Therefore, many opt to invest in gold-focused mutual funds or paper assets like ETFs or mining stocks instead.