Can You Hold Gold in an IRA?
Investment in precious metals like gold is not possible through standard IRA custodians; to purchase physical gold you need a special account called a self-directed IRA that allows for alternative investments like precious metals and real estate purchases.
When purchasing a gold IRA, make sure that the provider offers transparent pricing and low storage fees, while also avoiding high-pressure sales tactics.
Costs
Gold IRAs operate like traditional IRAs, except they allow investors to invest in physical precious metals such as gold coins and bars rather than stocks and mutual funds. There may be associated costs when holding precious metals in an IRA account that should be carefully considered prior to making this investment decision.
Storage fees can be one of the highest expenses when dealing in gold. Most dealers sell their products above market price to make more profit from sales; thus they must charge storage fees to make money from sales of physical bullion.
annual account administration fees are another expense that must be factored into any budget. While fees vary between firms, it’s wise to select one with transparent, competitive gold purchases and excellent customer education and support – such as Birch Gold Group which has transparent account setup fees as well as numerous precious metal products with educational resources and an outstanding Better Business Bureau and Better Consumer Agency rating.
Taxes
Gold IRAs are similar to traditional IRAs in that contributions and earnings accumulate tax-free until retirement; however, unlike traditional investments they allow you to hold physical precious metals like bars and coins instead. Unfortunately, setting up such an account requires using a custodian and storage at an approved depository which incur additional fees that you might be unaware of.
These fees include both one-off setup fees as well as annual maintenance and storage expenses, which can vary by provider and can include anything from a percentage of asset value or flat rates, to increasing charges that increase with each piece of gold you own, which could quickly eat into returns over time.
Other expenses can add up quickly, such as the costs associated with safeguarding your gold at an approved depository. While these charges may be included with your storage fees, they should always be made explicit so you have an accurate picture of all costs involved.
Liquidity
Individual Retirement Accounts, or IRAs, provide tax deferred savings options for retirement. Usually established at financial institutions for individuals rather than employer sponsored plans such as 401(k), an IRA is often the perfect way to accumulate retirement savings tax free.
Investment liquidity refers to the ability of quickly turning an investment into cash in a market with multiple buyers. This can be accomplished by saving cash in an online savings or certificate of deposit account as well as investing in marketable securities such as stocks, ETFs, mutual funds or bonds.
Many investors fail to remember that their IRA investments are non-liquid and must only be withdrawn after reaching age 59 1/2 without incurring tax penalties of up to 10%, which can significantly diminish returns. Therefore, it’s wise to set aside cash reserves within your Self-Directed IRA in case any costly mistakes such as providing personal loan guarantees to entities owned by your IRA generate unrelated debt-financed income in future years.
Security
The Internal Revenue Service has specific guidelines regarding what precious metals may be purchased for an IRA. They only permit gold and other metals that meet specific purity and manufacturing standards to be included, meaning if you want physical gold in your IRA it cannot be stored at home or with traditional custodians like Fidelity or Schwab; instead you must find a self-directed IRA custodian who specializes in handling physical metals like Fidelity or Schwab do.
These providers usually charge storage fees, but offer secure, segregated storage solutions compliant with IRS regulations, making them an attractive option for investors looking for single point of storage rather than multiple parties or risking theft or damage of their precious metals.
Consider other costs as well, including transaction fees that will be assessed when buying or selling precious metals within your IRA account. Transaction fees usually represent a percentage of transaction values; over time these could accumulate considerably.
Comments are closed here.