Still, a gold IRA can be a good option for investors who want to diversify their retirement accounts and also take advantage of the hedging benefits that the yellow metal offers over other financial assets, such as fiat currency and stocks. Many financial experts recommend holding 5 to 10% of a portfolio in gold. In retirement, you need an investment that either generates current income or is reasonably expected to appreciate in value so that you can sell and use it for consumption in the future. You’re essentially wasting tax-deferred space on something that doesn’t generate income. So you’re not saving before taxes.
As with any other traditional IRA account, the value of the account is subject to tax when paid out. Unlike owning stocks, mutual funds, ETFs, etc., the IRS also has guidelines on what type of gold can be bought for an IRA and how it should be held. For anyone worried about financial security in retirement, these ads touting gold and silver IRAs on conservative-leaning cable TV channels and digital news outlets can sound pretty compelling.
Proponents of gold IRAs argue that these costs are worth the peace of mind of being protected from a potential financial apocalypse. These companies go through an audit process to ensure that the gold they receive is the gold you ordered. To properly set up an individual retirement account (IRA), you’ll need to find a custodian that allows you to hold precious metals, such as gold, within the IRA. While the majority of IRAs invest in more traditional assets such as stocks, bonds, and cash equivalents, the tax code also allows “self-controlled vehicles” that can hold precious metals such as silver or gold.
The advantage of gold ETFs is that you can buy and sell stocks just like stocks and hold them in a traditional IRA or 401 (k). No special account is required. However, since the Great Recession, there has been a wave of advertising encouraging pension savers to convert their savings into precious metals in an individual retirement account or a gold IRA. Including gold or other precious metals as a significant part of your IRA is usually a long-term mistake due to the high costs, relative volatility, and mixed investment balance. To help customers avoid this threat, some IRA companies, for example, buy back their gold at the then-current wholesale price.
This can be a challenge for gold IRAs and may require selling inventory to comply with RMD rules. While regular IRAs are limited to securities such as stocks and bonds, the IRS allows alternative investments in self-managed IRAs. Many online gold IRA providers have streamlined systems and work closely with established custodian banks to take the guesswork out of making these decisions.