A gold IRA is a type of self-directed IRA that allows you to invest in gold bars for retirement. In a regular IRA, you can’t own physical gold, although you can invest in a wide variety of assets that are invested in gold, such as gold stocks or gold ETFs. A gold IRA can give you the tax benefits of a traditional retirement account, but you must comply with IRS regulations or risk fines and penalties. Buying physical gold for a retirement account can also be more expensive than investing in assets such as stocks, bonds, or mutual funds.
It’s important to be aware of all costs and expenses before you buy physical gold to keep in an IRA. If you want to hold physical gold in an IRA, it can’t be your regular account. It must be a separate, special IRA, called a Gold IRA. An even more indirect way to invest in precious metals is to have your IRA buy common stock from mining companies.
The custodian is an IRS-approved financial institution (bank, trust company, broker), but many financial services and mutual fund companies that process regular IRAs do not use the self-directed version. Presumably, a reputable brokerage firm that acts as an IRA trustee will not allow an IRA to buy shares in an unapproved ETF in the first place. Once a traditional IRA owner reaches 72 years of age, the minimum distributions (RMDs) required by the IRA must also be completed. 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.
Because the gold in a gold IRA must be stored in an IRS-approved deposit, you can’t store it in a safe, a home safe, or under your mattress. Of course, there are pros and cons of investing in physical gold, and there are pros and cons of investing in gold IRAs, which are listed below. This is a type of IRA that the investor manages directly and is allowed to own a wider range of investment products than other IRAs. Therefore, for federal income tax purposes, the transaction is marked as a taxable distribution by the IRA, followed by a purchase of the metal or coin by the IRA owner (that would be you).
Self-directed IRAs, which include Gold IRAs, have the same contribution and distribution limits, which depend on your age, as traditional IRAs. Gold IRAs are usually defined as alternative investments, meaning that they are not traded on a public stock exchange and require specialized expertise to value them. To avoid the prospect of missing out on the rollover cutoff, many people choose to have their Gold IRA company coordinate the rollover through a direct transfer from institution to institution. The big practical problem is finding an IRA trustee who is willing to set up a self-directed IRA and facilitate the physical transfer and storage of precious metals assets.
Gold IRAs have higher maintenance fees than other types of IRAs because of the additional costs associated with investing in gold. The timeline for starting to claim the required minimum distributions (RMDs) of a traditional Gold IRA depends on your age or the year you were born.