Why Put Gold in an IRA?
Gold, silver and other precious metals are seen by many as safe investments that may help provide protection from inflation. However, there are risks and fees involved with owning precious metals as investments.
Be wary of hidden fees by comparing fees charged by different providers before investing your retirement savings. Make an informed decision before investing.
Tax-free growth
Gold IRAs are an increasingly popular way of diversifying retirement savings. Similar to traditional and Roth IRAs, you can transfer funds from other retirement accounts into one. What sets gold IRAs apart is their investment potential in physical precious metals which must be stored and insured with an accredited custodian.
Gold has long been considered a safe investment option. Its price tends to increase during times of inflation and can act as an insurance against losing value of the dollar.
Gold IRAs may not be suitable for everyone; before making any investment decisions, always seek advice from an accredited financial planner. Furthermore, gold IRAs come with some downsides:
Diversification
Gold has long served as an effective diversifier and can serve to cushion losses when paper investments like stocks experience drops in their value. That is why many people choose to roll over their retirement savings into a gold IRA.
Before making this leap, however, it is wise to be aware of some special risks related to gold IRAs that should be carefully considered before diving in. First among them is cash-out costs which are fees charged by dealers when liquidating your investments.
Fees associated with gold IRAs include one-time account setup fees, custodian and storage charges – generally, these costs tend to be higher than with traditional IRAs. Furthermore, according to Internal Revenue Code regulations there are certain restrictions as to what precious metals you can invest in such as only buying American Eagles from authorized producers are permitted for these accounts.
Safety
Gold-backed IRAs offer retirement savers who are concerned about the economy a great opportunity for diversification and may help offset any losses in other investments during times of economic instability. Before rolling over funds from conventional retirement accounts to precious metals-based IRAs, however, it’s wise to seek advice from financial and tax professionals; such accounts typically incur higher management fees since physical assets must be stored with an IRS-approved depository (an IRA prohibits its holders from possessing assets directly).
Jewelery does not provide yields or interest that is central to traditional IRAs, while investors in precious metals-based IRAs must be wary of early withdrawal penalties as these accounts fall under the same regulations as traditional and Roth IRAs. Depending on which account type and your age you select, you may owe taxes plus an early withdrawal penalty of 10% upon withdrawing funds early from precious metals-based accounts; with traditional or SEP IRAs there will no taxes payable until retirement age has been reached.
Taxes
Gold can provide a hedge against inflation and market fluctuations, yet it doesn’t offer the same potential for growth as stocks or bonds. Like any investment, a gold IRA should be approached with caution, since its value can fluctuate and should only be seen as long-term play.
Traditional or Roth gold IRAs enable investors to invest pretax dollars before paying taxes only when withdrawing them after retirement. Furthermore, contributing to these accounts offers tax benefits; you can even deduct contributions.
Self-directed IRAs allow investors to invest in physical precious metals like coins and bullion without incurring setup, annual storage and custodian fees. To find a trustworthy self-directed IRA company with all necessary licenses, insurance and bonding is important – they should provide evidence upon request as proof. Beware companies who pressure customers into buying their products quickly or claim “one-time deals” that won’t last.
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