The term gold IRA refers to a specialized individual retirement account (IRA) that allows investors to hold gold as a qualifying retirement investment. Investors with gold IRA accounts can hold physical metals such as ingots or coins in their portfolios, as well as securities related to precious metals. A gold IRA is a specific type of individual retirement account called a self-directed IRA. It's similar to a traditional IRA, which can contain stocks, bonds, or mutual funds.
In order to manage these investments, investors must find qualified IRA Gold custodians who are approved by the IRS to handle these types of accounts. A self-directed IRA confers the same tax benefits as a traditional IRA, but allows you to hold precious metals and other alternative assets in accordance with IRS regulations. A gold IRA is one way to save for retirement. As the name suggests, instead of stocks or bonds, it contains gold in the form of ingots, coins and ingots. It may also contain other precious metals such as platinum and silver.
Generally, people who have an IRA in gold seek to diversify their assets and protect themselves against inflation. However, since gold does not generate profits while it is in the depositary's safe, it has little advantage to put it in an IRA, whose main feature is the deferral of taxes on profits. In addition, when you reach the age of 70.5 or 72 (depending on your date of birth), you will have to accept a required minimum distribution (RMD) of the gold IRA, which will entail selling gold if it is your only IRA. It may make more sense to diversify your portfolio and protect yourself against inflation with other equity.
A financial advisor can help you develop strategies and implement a plan. A common way to finance a new IRA account in gold is to use funds that are already in another retirement account, such as another IRA, 401 (k), 403 (b), 457 (b) or the Thrift Savings Plan, in accordance with IRS regulations. With your personalized gold IRA or precious metals IRA, you'll continue to have beneficiaries, receive quarterly statements, and be able to log in online to check your balances. Money deposited in a traditional IRA is deductible, up to the annual allowable limits, while the cash in a Roth IRA grows tax-free and can be withdrawn tax-free during retirement.
There's also the fact that gold doesn't pay dividends or interest, so keeping it in an IRA defeats part of the purpose of the tax-advantaged savings mechanism. Since you can also have silver coins or ingots, platinum and palladium in a gold IRA, technically a more correct term is “Precious Metals IRA”. Starting in 1998, an IRA can invest in certain platinum coins and certain gold, silver, palladium, and platinum bars. Neither the IRS nor the federal courts have ruled on the legality of these agreements, and the IRS has warned that they carry the risk of disqualifying the IRA.
In addition to the account depositary, the gold IRA company will coordinate the functions performed by the depositary, the center where the precious metals in your IRA are physically located. Companies such as Oxford Gold Group and American Hartford Gold can help you with the process of creating an IRA and organizing the storage of your gold. Several companies promote IRA agreements with gold based on the checkbook control strategy, according to which the IRA does not directly own metals, but rather owns a limited liability company (LLC) through which the taxpayer buys and stores metals. If you're interested in transferring funds from your traditional IRA to physical precious metals, you should decide how you want to store them before funding a self-directed IRA.
With a gold IRA, which can be traditional or Roth, but must be self-directed, your account contains gold in the form of coins, ingots, or ingots. The gold IRA account company also sells you the gold bars and coins (or other precious metals) you choose to include in your gold IRA. If this isn't a priority for you, there are other ways to add precious metal exposure to your portfolio besides a gold IRA. While you don't need an IRA to invest in gold, opening one will provide you with significant tax benefits.