Can You Use Your IRA to Buy Gold?
Gold can be an attractive investment choice for certain investors; however, before taking this course of action it would be wise to consult a financial expert and request a wealth protection kit as a precautionary measure.
Self-directed IRAs (or gold IRAs) allow investors to invest in alternative assets like precious metals, real estate and private companies through individual retirement accounts.
Taxes
Investment in physical gold or precious metals comes with multiple costs. There’s the initial purchase price as well as safe storage and insurance costs that can quickly add up.
Also, investing in collectibles could result in higher tax bills due to losses being applied towards capital gains reduction first while losses on other investments generally don’t.
Notably, gold purchased for your IRA cannot be held physically by you; you will instead need to hire a custodian that has been approved by the IRS to hold it. Only certain coins and bullion are approved as eligible investments by the IRS – these must meet certain purity criteria such as being at least 99.5% pure and manufactured at a nationally accredited facility with an accompanying certificate of authenticity.
Storage
As opposed to stocks or mutual funds, which you can hold without incurring additional fees, physical precious metals require special handling and storage – the IRA custodian will charge extra for this service; additionally, insurance may need to be purchased to protect this investment.
Gold IRAs allow individuals to invest in coins and bullion that meet IRS purity standards, but law mandates they be stored outside your immediate possession. You can choose to store your assets in a safe deposit box (though this might violate IRS rules), locked box in gold dealer’s vault or approved depository.
Selling gold from your IRA directly to a dealer often involves paying a markup on its price as well as closing out fees to close out your account with them. Furthermore, any withdrawal may incur income tax as well as an early withdrawal penalty of 10%.
Insurance
As with any investment, precious metals IRAs come with both advantages and drawbacks. A gold IRA allows you to diversify your retirement portfolio while still remaining tax-deferred and avoid early withdrawal penalties altogether if needed for certain qualified expenses. On the downside, however, precious metals shouldn’t necessarily be seen as safe haven assets during times of economic turmoil; their values may decrease over time.
There may also be annual storage and insurance fees that are more costly than with other IRA accounts, a one-time account setup fee, as well as markups when purchasing metal. Overall, investing in physical gold only makes sense if it will add long-term wealth; otherwise it should only be employed as part of an overall well-diversified portfolio. For more advice about managing precious metals IRA accounts properly consult an experienced financial advisor.
Security
Step one in setting up a gold IRA involves choosing a custodian who specializes in self-directed IRA accounts, like American Bullion or APMEX that specialize in gold IRAs. Once that step has been completed, choose an investment firm who will coordinate the rollover process and assist in purchasing bullion or coins from reliable dealers.
Once you’ve located and purchased gold, it must be stored safely in an accredited depository. While storage and insurance fees will need to be covered, investing in tangible assets such as gold can provide security during times of economic turmoil; also providing diversification benefits against stock or bond volatility as well as providing protection from inflation through inflation protection IRAs.
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