Is There Such a Thing As a Gold IRA?
Precious metals offer long-term appreciation potential and can serve as a protective hedge against inflation; however, their costs can be high, such as fees associated with buying and storing physical metal.
Investors must conduct their own due diligence when it comes to finding a reputable dealer, custodian and depository, as well as being ready for required minimum distributions (RMDs) at age 70.5 or 72.
The Custodian
Gold IRA custodians are financial firms that manage precious metals IRAs to comply with IRS regulations, while providing you with access to reliable dealers who specialize in gold, silver or platinum sales as well as providing secure third-party storage within an IRS-approved depository facility.
Before selecting a custodian, it is wise to investigate fees, service offerings and reporting structures as well as obtain referrals and recommendations from trusted financial professionals and fellow gold IRA owners.
As with any IRA, qualified withdrawals from qualified withdrawals may be subject to capital gains taxes and physical gold is taxed at a higher rate than most long-held assets, making it essential to consult a financial advisor on how these taxes could impact your retirement strategy and determining if buying gold primarily as an inflation hedge or diversifying with other investment vehicles is right for you.
The Depository
Gold IRAs are self-directed individual retirement accounts designed to hold precious metals. You work with a company specializing in this form of account in order to buy metal from an IRS-approved depository and store it there; many of these companies also recommend or require specific dealers for your purchases.
Your dealer can either purchase the metal directly from you or arrange to have you buy it yourself and have it sent directly to them for storage. Some dealers may charge a markup or handling fee in addition to the cost of metal.
Keep in mind that precious metals do not offer returns comparable to stocks or bonds, so a gold IRA should only represent a minor part of your portfolio. In addition, it’s difficult to sell gold when needed cash or taking required minimum distributions (RMDs); should that occur, penalties could arise.
The Dealer
Precious metals offer an effective way to diversify and protect your retirement portfolio against inflation, while providing another asset class for investment. But opening a gold IRA requires more work and diligence than one holding traditional assets, including working with dealers, custodians, and depositories.
Most gold IRA companies charge fees for account maintenance, storage and insurance as well as markup fees when investors buy precious metals; these vary based on which metal type investors select for purchase.
People looking to open new gold IRAs often make use of funds from an existing retirement account such as their old-fashioned pre-tax IRA, Roth IRA or SEP IRA to fund it. The IRS allows up to 60 days for this rollover so investors can avoid incurring an early withdrawal penalty of 10% early.
The top gold IRA companies make it simple and safe for investors to fund their accounts with rollover. Their investment information is presented in an organized, objective fashion that gives their investors confidence.
The IRA
Precious metals IRAs follow many of the same regulations as regular individual retirement accounts and can be set up either as traditional pretax or Roth IRAs to suit an investor’s preferences. Distributions from precious metals IRAs are taxed as ordinary income and early withdrawal penalties apply, just like regular IRAs.
Gold IRAs are increasingly sought-after retirement portfolio diversifiers and inflation hedges for investors seeking protection. Gold tends to rise when stocks fall and is perceived as an excellent hedge against economic duress and market instability.
Investment in precious metals often incurs higher fees than investing in traditional IRAs, and requires more work on behalf of investors to establish. Furthermore, physical precious metals IRAs cannot hold traditional investments like stocks and mutual funds but must instead have a dedicated account with a custodian who specializes in holding physical metals instead. As such, physical precious metals IRAs are usually reserved for investors with significant wealth who deem the additional expenses worth their while.
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