Can I Invest in Gold in My IRA?
Gold investing offers many advantages, but investors should remember that physical gold is a hard asset, with costs associated with storage and insurance as well as no dividends being generated by it.
As part of setting up and maintaining your account, fees will also apply, such as one-off account setup charges, ongoing maintenance charges and storage fees.
Gold IRAs typically incur higher fees than traditional IRAs, making it essential that you understand them before deciding to invest. Fees associated with setting up, storing and insuring an IRA could include account setup, storage costs and insurance premiums; and could vary based on which precious metals you decide to purchase.
Another risk associated with inflation is potential decrease in purchasing power, and diversifying your portfolio with investments such as stocks or real estate may help protect against this risk.
At the time of cashing out your gold IRA, there may be additional costs related to its buyback program that may eat into any gains from investing. Most gold IRA companies sell it back at wholesale price instead of retail price – although still an expense that you’ll need to consider.
As an Individual Retirement Account (IRA), all distributions from an IRA must be taxed as ordinary income, and any withdrawals before age 59 1/2 incur a 10% early distribution penalty tax. A gold IRA does not make an exception for these rules.
The IRS allows precious metals IRAs, though you cannot physically hold bars or coins yourself; you must instead pay annual storage and insurance fees to an approved depository – these costs may be substantial.
Gold IRAs require several upfront costs: an account setup fee, annual maintenance fees, seller’s markup (markup on spot price of gold), and closing costs when withdrawing investments. All these charges make Gold IRAs more expensive than paper assets like stocks and bonds; however precious metals have near-zero correlation with paper investments such as stocks and bonds, making them an excellent diversifier in your retirement portfolio. Furthermore, inflation should have little or no bearing; your only risk would be failing to see enough appreciation in value growth to offset these expenses.
Gold Backed IRAs provide diversification and hedge against economic volatility, but can increase investment costs. On top of the IRA custodian fees and storage charges, there may be additional expenses related to buying, shipping and transporting physical gold; all this expenses could quickly eat away at your gains.
Gold IRAs don’t produce any income, unlike stocks, bonds and mutual funds that offer interest, dividends and capital gains distributions; therefore, any tax-deferred space spent is wasted without providing anything worthwhile towards growing retirement savings.
Gold tends to appreciate over time, especially as other investments such as currencies and stocks decrease in value. Therefore, many experts consider gold an asset worth purchasing with long-term goals such as retirement in mind. Furthermore, unlike currencies and stocks which can decrease in value drastically over time, its price can’t depreciate to zero like they can with currency trades or stocks which often become worthless quickly.
Gold IRAs can provide an effective means of diversifying your retirement portfolio. By providing protection from economic instability and being perceived as safe long-term investments, gold IRAs provide a good diversification strategy for investors who prefer hedging their bets against economic downturn. But investors should avoid placing all their savings into gold alone – it would be wiser to spread out among different asset classes too.
Gold is an asset you can hold in your hand and many believe will remain around for centuries to come. But it’s important to keep in mind that even precious metal can still be stolen, making it imperative that when investing in a Gold IRA account you choose a reputable custodian and broker.
Physical gold does not generate income or yield, therefore preventing it from qualifying for tax-deferred growth like traditional stocks and mutual funds do. Furthermore, the IRS prohibits IRAs from holding collectibles like coins; this can act as an impediment to those looking to invest in Gold.