A gold IRA allows you to invest retirement funds in physical precious metals. Those investments must be stored in an IRS-approved depository, so there are storage fees associated with a gold IRA.
The best Gold IRA companies offer competitive pricing, transparency, and unbiased customer education. They also don’t charge ancillary fees and have a track record of customer service.
Buying Gold
If you want to buy physical gold for your IRA, you will need to work with a precious metals dealer and a custodian. The dealer will buy the gold, and the custodian will store it for you in a protected depository. Many gold IRA companies have preferred custodians and depositories that they either recommend or require their clients to use.
Because gold and other precious metals are physical, they have higher storage costs than paper assets like stocks and bonds. Also, gold prices tend to be volatile, so you may face more risk than with traditional IRA investments.
Another advantage of a gold IRA is that it typically does not go through probate, the process by which the estate of a deceased person is reviewed and distributed to beneficiaries. This can save time and money for the beneficiaries. However, you must make sure the gold IRA is set up as a self-directed IRA, and you must adhere to IRS rules about purity, production and other attributes.
Investing in Gold
Gold IRAs allow retirement investors to hold physical precious metals within their tax-advantaged accounts. They typically come with higher fees than traditional IRAs due to the costs of holding and insuring physical assets.
Gold also doesn’t pay dividends, so you’ll only see a return on your investment if you sell it for a profit. This makes it a long-term play that requires patience and discipline.
You can choose from several different types of gold IRAs, including traditional, Roth and SEP gold IRAs. A traditional Gold IRA allows you to fund it with pretax dollars and the earnings grow on a tax-deferred basis until you take distributions in retirement.
A SEP gold IRA, on the other hand, is designed for self-employed individuals and small business owners. It’s a great choice for those looking to diversify their portfolio and hedge against inflation. However, it’s important to consult a financial advisor before rolling over your IRA into a gold IRA.
Taxes on Gold Investments
The IRS tax treatment of gold differs from that of other financial investments. The agency taxes gains on precious metals, including gold, as collectibles and not at the standard 28% long-term capital gains rate that applies to most other assets.
Gold and other precious metals may be held in traditional IRA accounts, or self-directed IRAs that hold physical bullion and coins. These specialty accounts require custodians that accept self-directed IRAs and can handle the additional documentation and reporting required by these types of accounts.
A gold IRA can be a traditional IRA, which is funded with pretax dollars and you pay income tax on withdrawals in retirement, or a Roth IRA, which is funded with after-tax money and you do not pay taxes on withdrawals at all. Your account can also be a SEP IRA for small business owners, which has lower contribution limits. Like regular IRAs, these types of accounts are typically subject to annual fees and other charges.
Choosing a Custodian
The decision to put some of your retirement savings in gold is not one that should be made lightly or without careful research. Learn as much as you can about the options and fees involved, preferably via unbiased sources (not gold IRA companies, which have a vested interest in selling you their products).
Inquire about the one-time fee charged to set up a new IRA account and the annual costs for storage and transaction services. Also, check whether a custodian offers insurance coverage for the physical precious metals in its possession.
Compare fees across reputable gold IRA custodians. It is important to avoid charges that will eat into your gains, such as those associated with storage and transactions. Also, beware of IRA gold providers who bake hefty premiums into the quoted price of their bullion — effectively concealed fees. Demand transparency to see the best deals in the market. This way, you can maximize your return on investment.