Should I Have Gold in My IRA?

People looking to include physical gold in their retirement account tend to rely on self-directed IRAs, which allow for investment across a broader array of assets than traditional IRAs.

However, investing in gold with an IRA does have its drawbacks, so it is wise to carefully assess all benefits and costs according to your own individual situation.

Taxes

Though many invest in gold via official coins or bullion, traditional IRA investments in precious metals involve different rules. An investor cannot keep physical possession of their investment; they must pay an annual storage fee to a broker instead and if cashing out before retirement must pay tax in accordance with their current income tax bracket.

Gold IRA specialty providers (commonly referred to as “gold IRA companies“) utilize dedicated custodians and storage facilities, as well as experts who know the best methods for purchasing physical gold and other precious metals for your IRA. Furthermore, these firms tend to forgo high-pressure sales tactics that often plague other financial services and investment firms, creating an experience that is efficient and effective – essential as investors only pay fees necessary for their investments to grow.

Fees

Investing in gold through an IRA should be taken seriously and with care. By rolling over an old 401(k), or selling traditional assets to accumulate precious metals within your self-directed retirement account, you are making a substantial change that could drastically alter your portfolio’s profile.

As physical gold is a hard asset, it must be stored at an IRS-approved depository with associated storage fees and insurance costs; additionally, gold IRA custodial fees tend to be higher than similar accounts that hold paper assets such as stocks and bonds.

As part of selling assets, additional fees may apply when selling them, including account setup and annual custodian fees as well as seller markups on spot price of commodity. These charges can add up quickly if withdrawing early from an account – they apply with an early withdrawal penalty of 10% until age 59 1/2 is reached.

Investments

Gold IRAs differ from their traditional counterparts in that you hold physical precious metals as opposed to paper assets like stocks and bonds, which is attractive for people who appreciate owning gold as an investment but it can be risky.

When opening a gold IRA, you will require both a custodian and approved depository for your investment. Furthermore, annual storage fees may apply. According to Sentell,

As soon as you turn 72, you must start taking required minimum distributions from your gold IRA. When this time comes around, if desired, an in-kind distribution is permitted, which allows you to receive physical gold rather than selling it off for cash. But keep in mind that its value may have decreased since you bought it; so it is wise to consult legal, financial and retirement professionals prior to investing in one.

Diversification

One of the key pieces of investment advice is diversification; gold IRAs offer an effective means of doing this. Physical assets, like gold, have proven that they offer more reliable diversification benefits than paper investments such as stocks or mutual funds which may be susceptible to market instability.

Gold IRAs allow investors to purchase and hold physical precious metals without the risk of market fluctuations wiping out your principal investment. Furthermore, because gold prices often increase when the dollar declines, this form of savings provides protection from inflation as well.

Keep in mind, however, that metals aren’t very liquid investments and may present challenges when taking required minimum distributions (RMDs) or moving your gold into another retirement account. Prior to making any decisions about investing in gold IRAs it would be prudent to consult your financial advisor.


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