Can I Hold Gold in an IRA?
Only self-directed individual retirement accounts (IRAs) allow investors to hold physical gold within an IRA. Many gold IRA companies provide assistance in setting up such an IRA and managing purchases and storage at IRS-approved depository facilities.
Physical gold must be stored with your IRA custodian; any storage in your own safe deposit box counts as a distribution and triggers taxes.
Investing in Precious Metals
Physical precious metals are an increasingly popular asset class for retirement portfolio diversification, providing investors with safe havens during economic downturns and an effective inflation hedge. But precious metal IRAs may incur additional costs. Before opening one, investors should carefully consider all associated fees.
An IRA for precious metals requires several steps, such as working with a dealer, custodian and depository. Your dealer may recommend working with a trust company or bank as custodian while the depositories often must comply with specific standards in order to hold metals safely. Each entity will incur fees which can add up over time.
Be mindful that precious metal IRAs do not generate income and, therefore, aren’t tax-deferred like other retirement accounts – this means you will owe taxes when taking an in-kind distribution – an important consideration if gold investments are intended as future sources of income.
Self-Directed IRAs
Dodson reports that there are few firms willing to act as trustees for self-directed IRAs that hold precious metals, which charge fees for opening an account, annual storage and insurance costs – which can add up when considering markups on precious metals as well as shipping fees.
The IRS has very stringent standards about what metals may be held in an IRA account, including purity and manufacturing specifications. If any metal doesn’t comply with this criteria, holding onto them could constitute a prohibited transaction and lead to penalties from the IRS.
Investors should exercise caution when investing their retirement funds in precious metals, which don’t generate cash flows for owners like stocks or bonds do. Many experts advise investors limit a precious metals IRA to no more than 5-10% of their total retirement portfolio in order to diversify with other traditional investments that usually offer greater returns such as stocks or bonds.
Custodians
Custodians may include banks, credit unions, trust companies, brokerage firms or savings and loan associations approved by the IRS to hold self-directed IRAs. Such custodians usually won’t provide investment advice.
When selecting a gold IRA company, look for one with transparent pricing on purchases and buybacks, no ancillary fees and an experienced staff. A trusted custodian should store precious metal investments safely at an IRS-approved depository facility.
An established custodian will have relationships with several trusted precious-metals dealers, so you won’t need to conduct your own research. Still, be sure to verify their reputation through consumer advocacy sites and Better Business Bureau ratings, industry accreditation or consumer advocacy forums such as Consumer Action or Buyback Policy Rating Services as well as industry affiliation. Also ensure the dealer offers robust buyback policies and is reliable – nothing worse than investing your tax-deferred space into an asset which won’t bring cash flows in future!
Taxes
A person looking to invest in physical gold via an IRA must select a custodian with experience handling precious metals who complies with IRS compliance rules. Once purchased, these metals may be stored securely with them incurring extra storage fees from your custodian.
An IRA that invests in physical precious metals must abide by strict IRS rules regarding what metals qualify. Only bars and bullion produced to meet IRS standards may be included; collectible coins must also be stored at a depository that meets specific criteria. Failure to follow these requirements could incur penalties for its investors.
At the core of it all lies gold and other precious metals’ role as investments for your retirement portfolio: They should serve only as diversification measures to enhance a more diverse investment approach. And should you choose to hold metals within an IRA account, make sure it’s done so with consultation of an independent fiduciary who has legal duties to safeguard your best interests.
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