Scam Alert! Must-Know Tips for Successfully Investing in Gold With an IRA
- Author: Miguel Waters
- Posted: 2024-08-05
The Gold IRA is the absolute toast of the town at the moment, trending as hard as celebs. Celebs like Chuck Norris and Sean Hannity enhance the allure of investing in gold, both being aligned with notable gold IRA companies.
What exactly is a gold IRA? How do you set one up? How do you maximize its potential? What tips/rules should you bear in mind?
What is a Gold IRA?
A gold IRA is an individual retirement account with which you can invest in paper gold and physical gold. There are also silver IRAs, and both are examples of a precious metals IRA.
A gold IRA is a type of self-directed IRA (SDIRA). A SDIRA allows you to legally invest in assets you typically can’t with a traditional IRA. According to IRS stipulations, you can hold any random types of gold coins and bars within your IRA. There are exceptions (discussed below).
How Do You Set Up a Gold IRA?
Setting up a gold IRA takes less than an hour. First, you have to find a SDIRA company that offers a gold IRA or a precious metals IRA. The company helps you with all of the paperwork, ensuring you complete and submit the necessary tax forms.
Next, you have to fund your gold IRA. You can do this with a bank transfer or by rolling over funds in an existing retirement account, like another IRA or a 401(k). Once funded, you’re ready to start investing in gold and other precious metals.
How Do You Maximize the Potential of a Gold IRA?
The diversity of assets in your gold IRA is what gives it earnings potential. The physical gold doesn’t accrue interest or pay dividends. However, your gold IRA allows you to invest in traditional and other, more non-traditional assets that make money:
Undeveloped land
Promissory notes
Real estate (houses)
Real estate tax liens
Real estate investment trusts (REITS)
Private stock
Crypto
Crowdfunded loans
Commodities
Limited partnerships
ETFs (paper gold)
In addition, as the price of gold fluctuates, it presents an opportunity to build a hedge against inflation. You can convert the physical gold in your gold IRA to cash at any time. Then you can channel the spending power of that cash into the purchase of more assets that make money.
Tips and Rules to Bear in Mind
The IRS forbids investing in collectibles with your IRA. The IRS’s definition of collectibles includes wine, works of art and precious metals. There are exceptions, though.
The trick is to find precious metals whose characteristics align with IRS criteria regarding physical precious metals you can legally purchase and hold in your IRA. Fortunately, many precious metals brokers consolidate their IRA-eligible precious metals for you.
This removes the guesswork when you’re hunting down IRA-eligible precious metals products. Some of the more well known examples of IRA-eligible precious metals products include the American Gold Eagle coin and the Canadian Gold Maple Leaf coin.
An IRS-approved custodian must be in charge of your gold IRA’s administration. The custodian keeps your file in good tax standing, filing necessary forms and completing purchases at your request.
You must store your IRA gold in an approved depository. Physical possession of your IRA gold amounts to a withdrawal, in which case the IRS imposes taxes and penalties.
How Does a Gold IRA Compare to a Roth or a Traditional IRA?
Traditional IRA contributions are tax-deductible, the subsequent withdrawals subject to tax. By contrast, Roth IRA contributions are not tax-deductible, but subsequent withdrawals are all tax-free.
The Roth IRA is an excellent idea if you expect to be in a higher tax bracket at retirement. A gold IRA specifically allows you to invest in physical gold.
Banks, financial institutions and firms that offer investment products typically don’t offer physical Gold IRAs. They lean more toward traditional portfolios containing stocks, bonds and ETFs.
The investment opportunities they offer consist of investment products that they want you to buy. As of this writing, the array of available investment products associated with traditional and Roth IRAs does not include physical gold.
Options for Cashing Out
With a Roth IRA you can’t start making withdrawals (distributions) until you’re 59-and-a-half or until your account is at least 5 years old and you’re at least 59-and-a-half. You have the option of receiving your physical gold delivered to you.
Or you can sell your physical gold to the depository and receive a check for the gold’s cash value. Another option is to bequeath your IRA to a beneficiary after your death. This allows the beneficiary to cash out or rollover those funds into their own retirement account.
