Savvy savers and investors are always looking for better ways to manage their retirement funds- and that often leads them to gold. Gold IRAs are one of the ways people can diversify their portfolios- but is it right for you?
Here is an overview of everything you need to know about gold IRAs, how they work, and how to get one.
An Introduction to Gold IRA
If you have ever considered a gold IRA – or have perhaps only heard of them but don’t know much about them, this guide is for you. It covers every element of choosing, opening, and using a gold-backed individual retirement account- and the pros and cons of doing so.
What Is a Gold IRA?
A gold IRA is a type of savings account that lets people invest in and store physical precious metals.
It is a tax-advantaged savings account that is very similar to traditional IRAs- the only real difference is the types of investments you can make using the funds.
They are held separately from other investment accounts, and are operated on an individual basis. Gold IRAs are self-directed as far as investments go- but they must have an IRS-approved custodian to handle the actual purchasing and storing of gold.
Furthermore, gold should be stored in an IRS-approved safe storage facility- not at home. More on that later.
Types of Gold for IRA Investments
What exactly can you buy with the funds in your gold IRA? It goes without saying that you can invest in gold- but what are the specifics?
Unlike other IRAs, you can purchase gold in its physical form- including bullion, coins, and bars. There are some regulations on the products you can buy- mainly based on purity levels and proof of authenticity.
There are various types of gold IRAS in the sense that you aren’t just limited to gold, you can include silver, platinum, palladium, and more.
Storing Gold in IRA Savings
Once you buy your gold- and we will explain how to do that a little later- it must be stored somewhere. As you can possibly imagine, physical precious metals such as gold take up a lot of space- and it is not exactly safe to have it lying around your home.
Luckily, there are specially-built storage facilities that are approved by the IRS for keeping your physical gold investments safe. They are in various locations across the USA- and what one you will use depends mainly on the gold IRA company you choose to open an account with.
There are storage fees included in account costs in most cases- although you need to check the specifics when you are researching different companies. It is also possible with some providers to choose your own depository for storing gold- but it has to be approved by the IRS.
Some companies advertise home-storage gold IRAs- meaning you can buy gold and keep it on your property. Please bear in mind that these services are misleading, and the IRS does not approve of them.
If you store precious metals at home, you open yourself up to many risks- including theft and investigations from the Inland Revenue Service.
How to Rollover a Traditional IRA to Gold
After deciding that gold investments are for you, and a gold IRA is the way to go- the next question is how to add the funds you need to buy your physical precious metals. If you already have savings in an IRA, you may not have enough additional funds available to buy gold in an IRA – but there is a way to access the money you have already stored.
Usually, you are not allowed to withdraw money from a traditional IRA before a certain age (59.5 years)- but there is a process in place that allows you to move money from one individual retirement account to another. That includes a gold IRA.
This process is called a rollover- because you roll money out of one IRA and into another. It is not technically a withdrawal, since nothing is spent, and it is only out of the savings account for a short time.
How does it work? Here is a detailed step-by-step guide to rolling over funds from traditional IRAs to gold IRAs.
Step One: Open a Gold IRA
Before you do anything, you need to set up your gold IRA account. There are many gold IRA companies to choose from- many with long-standing and trusted reputations (see below for some recommendations).
You must open an account through a representative. I personally chose Goldco. Read my review to see all the reasons that led me to do so.
Step Two: Appoint a Custodian
Many gold IRA companies automatically assign an account custodian as part of the account service- but it is not always the case. Start by finding out if a custodian is already appointed, and if it is not- appoint one.
The custodian is a very important person in the gold IRA world. Nobody can invest in a gold IRA without an IRS-approved custodian- and only they can actually make investments on your behalf.
Step Three: Decide How Much to Move
Next, you need to make a decision regarding the amount of money you intend to invest in your gold IRA. This is an important decision- so it is best to discuss it with your financial advisor.
It is also worth noting that there may be a minimum investment requirement with the gold IRA company you choose. Most providers have an account minimum for opening a gold IRA- it can range from $5000 to $50,000- so make sure you pick one that works for your budget. I wrote this page to talk about how to fund a gold IRA and the options available.
Side note- if you are moving additional funds after an account is already opened, you cannot exceed the annual contribution limits.
Step Four: Direct Your Current IRA Account Administrator to Move the Funds
When you know how much you want to move, your next step is to direct the administrator of your existing IRA to move the funds out of the account and into your personal account. Explain that it is for the purpose of a gold IRA rollover, and ask for confirmation of when the money has been moved.
Usually, they don’t ask too many questions- although you may need to provide the details of your new gold IRA account and its custodian.
Step Five: Wait for the Funds to Arrive In Your Account
Keep an eye out for the withdrawn funds showing up in your account. These days, most electronic money movements are reasonably fast, so you shouldn’t expect to be waiting too long.
You can always ask for an estimated ETA from the IRA administrator.
Step Six: Send the Funds to Your Gold IRA Within 60 Days
This is the most important step of all. Once the withdrawn IRA funds arrive in your bank, you must deposit them into your gold IRA within 60 days. Do not spend it, do not withdraw it, do not do anything other than move it immediately to your gold IRA and inform your custodian.
Why the big rush? Because if you don’t, you will lose out on a chunk of money- and that sort of defeats the purpose. You can roll funds over between IRAs without paying tax, but you can’t just withdraw it without the IRS having something to say about it.
If you fail to deposit rollover IRA funds into your precious metals IRA within 60 days of its arrival, it is considered an early withdrawal from your IRA. That means paying a hefty 10% of the withdrawn fund as tax- not to mention the potential fines.
Step Seven: Get Confirmation from the Gold IRA Custodian
Once you have done your part, you just need to wait for the gold IRA custodian to confirm the funds have arrived safely in your account- and are ready to be spent!
Step Eight: Choose Your Products
Your money has now been rolled over from a traditional IRA to a gold IRA- but it still is not gold. First, you need to buy physical products! Start by thinking about what you actually want to do.
One of the best ways to decide what products to buy is to have a good look online at your options. Almost every gold IRA company has its own precious metals shop and broker, and they can generally be trusted to sell only gold that is approved by the IRS.
Browse the options, look into the choices, and decide what gold and other precious metals you want to have in your portfolio.
Step Nine: Have Your Custodian Buy Precious Metals With the Rolled-Over Money
A common misconception regarding gold IRAs is that you can buy gold yourself online and send it there. That is actually not the case- only your appointed custodian can purchase gold using the funds available in the account.
This is an IRS regulation and safety measure- and it also helps make sure people don’t make mistakes and buy the wrong products. Although the funds are technically self-directed (only you as the account holder can decide what the money is spent on- the custodian should never make an investment without your permission), it must be the custodian who makes the actual purchase.
Step Ten: Wait for Confirmation that the Gold Is Stored
Your newly-purchased gold will be sent to the secure depository facility connected to your gold IRA company and provider- unless you work with a company that requires you to choose your own.
Once it is there, the rollover is officially complete!
Other Ways of Funding an IRA with Gold
You can invest almost any funds you have in gold through a gold IRA- just speak with a financial advisor about the best ways to do so. One of the most popular transfer methods (other than to transfer funds from a traditional IRA) is a 401(k) to gold rollover.
It works in much the same way as a traditional IRA rollover- in that you withdraw funds from your tax-advantaged savings accounts to move them into one that allows investments in physical precious metals.
Similar regulations and timeframes apply to 401(k) rollovers and traditional IRA rollovers- and failure to complete the transactions results in heavy penalties and taxes.
If the thought of a ticking clock and the responsibility of moving the money in time is a little stressful for you, don’t worry- there is an alternative. Instead of a rollover, you may be able to arrange a direct transfer.
That means skipping you altogether, and leaving you with no responsibility whatsoever for the bulk of the move- you just need to direct the funds once they arrive.
A transfer is arranged by you but between the administrator of your existing savings account and the custodian of the gold IRA. Money is wired straight through- making it a much faster and easier process when it is possible.
The Goal of Gold IRA Investment
In a nutshell, the purpose of investing in a gold IRA (for most people) is to diversify your portfolio for retirement. Keeping all your eggs in one basket is never recommended- especially when it comes to long-term savings.
Other purposes of physical gold investments include wealth protection and making the most of tax advantages.
Investing in Gold IRAs for Retirement
As mentioned, most people looking into gold IRA savings accounts are planning their retirement. Gold is considered a low-risk safe haven asset. It may not yield wildly impressive returns for most people, but it can appreciate over time- and provides an excellent hedge against inflation losses.
One of the important things to remember when planning your retirement savings is that gains and profits are not the only things that matter. You also need something in your portfolio that offers some protection for your wealth in case of economic uncertainty or even a crash.
When deciding how much of your investment portfolio to invest into a gold IRA, there are several factors to consider.
What is the current price of gold at the time of purchase? If prices are up, you will get less for your money, so it may be better to invest less now and wait for another opportunity.
What are your overall saving goals? Gold doesn’t- as a rule- bring in massive profits for investors, so if you are hoping to grow your wealth through investment, you don’t want to have too big a percentage tied up in gold.
How volatile is the market? People often look at the word volatile as if it is some kind of curse word- but it is the very thing that makes it possible to turn profits on assets such as gold. Study the gold market- or have a financial advisor explain the ins and outs at the time you are planning your investment.
How far away is your retirement? There is a big difference between the types of investments you should be making 30 years before retirement and three years before retirement. If it is way in the future, your ideals are probably a little different, and you may want to have more money available for other investments.
Remember- everyone is different, and your investment journey is not the same as anyone else’s. Always speak to an advisor before investing in gold retirement accounts.
Other Reasons for Choosing an IRA Investment in Gold
Gold is one of the longest-standing investment options in the world. Over generations, gold has held significance- both symbolically and financially- as something trustworthy, reliable, and valuable.
We have come a long way from gold bars in trunks under the bed or buried treasure- today, the ways to own gold are very different.
Why choose a gold IRA? Here are some reasons to invest in a gold IRA.
Let us say now that although a gold IRA is the only retirement savings account that lets you store gold, there are several other ways to buy and store it- so what makes this the best way to do it?
Buying physical gold bullion, jewelry, or collectible coins online, in stores, or through brokers is very different from investing this way. These purchases are viewed as belongings by the IRS- and are taxed accordingly. You can’t really view them as a solid part of your retirement investments.
There are people who buy gold bars and keep them hidden at home instead of safely in an account. This is not only pretty risky from a security point of view, but it is also frowned upon by the IRS- and if they find out someone is doing it, they are pretty likely to investigate their tax records. If they find something that doesn’t add up, they don’t look kindly on it- and you will face heavy penalties.
Is a Precious Metals IRA a Good Idea?
Let’s get down to the nitty-gritty: are precious metals IRAs actually a good idea? The short answer is: it depends on the individual. Gold investing is not for everyone- but it does have universal benefits that make it appealing no matter who you are.
Here are some of the reasons you should open a precious metals IRA.
You want to hedge against inflation in your long-term savings plan.
You are looking for ways to maximize your tax-free assets.
You have several high-risk investments and want to bring some balance.
You have a low-risk tolerance but still want something with the potential to appreciate over time.
You want to own gold but are concerned about IRS inquiries if you keep it at home or in an unapproved storage location.
Here are some of the reasons you should not open a precious metals IRA.
You want to collect gold coins- many of which are not approved precious metals for gold IRAs,
You have a high-risk tolerance and want to put as much of your savings as possible into potentially high-return investments.
You don’t have a particularly large portfolio to invest.
Overall, gold IRAs have a place in many people’s investment plans- but they are not a must-have for everyone. Nowadays, some investors favor other safe-haven assets for portfolio diversification- believing that gold is outdated and not part of the future.
Really, it is best to do some thorough research into the market with the support of a trusted financial advisor. They can advise how much- if any- of your savings to convert to gold.
Who Should Open a Gold-Backed IRA?
People with large portfolios who want to balance and protect their wealth.
Investors looking for a reliable, low-risk asset to keep in their back pocket.
Someone who has an interest in the gold market- and wants to be a part of it in a secure and approved way.
Retirement savers aiming to diversify their portfolios.
Those looking for a safe-haven asset to hedge against inflation.
Are There Tax Benefits on Gold in an IRA Account?
One of the main reasons people decide to open a gold IRA is to make the most of the tax advantages it offers. The money invested in these accounts through physical gold purchases is not taxed- as long as you follow certain gold IRA rules.
As long as you tick the following boxes, you can save your money without owing anything to the IRS.
You buy only approved precious metals.
All of your gold investments are handled through an IRS-approved custodian.
Everything is kept in an IRS-approved depository and storage facility.
You do not exceed yearly investments of $6500 if you are under the age of 50- or $7500 if you are older than 50 (these figures have just increased in 2023).
The rollover or transfer process is completed within the allotted timeframe, and all directed funds are moved to the gold IRA.
You do not withdraw funds before you are 59 and a half years old.
If you break any of these rules, the funds become tax deductible- and you will face fees and charges from the IRS. They are taxed at 10% if withdrawals are made too early, or the rollover is completed too late.
Gold IRA Account Overview: How It All Works
We have gone through most of the important details of gold IRAs- now here is a summarized overview of how everything works- and what to expect. Below, we recap the benefits and drawbacks of gold IRA investing, how the process works, and what you can invest in.
Additionally, we have shared details of some of the most popular gold IRA companies you can trust- and a little about how to get started in the first place.
Investing in a Gold IRA: A Quick Look at the Pros and Cons
First things first- what are the general pros and cons of having a gold IRA as part of your portfolio?
Pros
Gold is an excellent inflation hedge. While currency can lose its value over time, gold tends to go up and down- but retains its intrinsic value. As such, it helps to hedge against inflation by remaining a stable source of wealth through times of economic unease.
There is only minimal risk involved when investing in gold. It has been valuable for generations- and will more than likely stay that way for the foreseeable future.
Investing in gold creates a more balanced, diverse portfolio that can stand the test of time.
You can make tax-free deposits every year- and if you wait long enough (older than 59.5 years) to withdraw the funds, you never have to pay fines.
The price of gold tends to move in the opposite direction to the US Dollar- so if you have both, your wealth is protected. When one is down, the other is generally up.
You can store your gold in a secure depository facility in the US- keeping it safe and away from the attention of the IRS.
It is a self-directed IRA, so you have complete control over how your money is used.
Cons
Although gold is a safe haven asset, it can drop in value- and often does.
There are limitations to how much you can invest and what you can use it to buy.
You run the risk of tax penalties if you take too long to complete the rollover or if you make a withdrawal before you are 59 years and six months old.
Gold rarely offers high returns on investments. It is not high risk or high reward.
If you buy at a bad time, you could lose out on some value.
How Do Gold IRAs Work?
Put simply, gold IRAs work by offering people the same tax benefits and saving possibilities as traditional individual retirement accounts with the additional bonus of being able to buy physical gold and other precious metals.
The process of opening a gold IRA is simple- and should be done through one of the many reputable gold IRA companies found online.
Once open, people can add funds by rolling over or transferring funds from their existing IRA savings or 401(k). Doing so allows them to deposit a larger lump sum if they wish to. Alternatively, they can contribute up to $6500 (under 50-year-olds) or $7500 (over 50-year-olds) each year from their earnings and other savings.
Every gold IRA must have an appointed IRS-approved custodian and be connected to a secure storage facility to hold physical gold on behalf of the investor. You are not meant to keep gold IRA products anywhere other than one of these approved facilities.
Funds in a gold IRA can be used to buy a variety of precious metals- as long as they meet the purity requirements and other regulations. They cannot be withdrawn before the account holder is 59.5 years old- unless they are willing to lose 10% of the money to tax.
There are various types of gold IRAs to choose from- but they all offer similar benefits.
Types of Physical Gold IRA
Traditional: A traditional gold IRA is funded with pre-tax dollars. Savings grow on a tax-deferred basis- meaning they are taxed on withdrawal. Waiting until the correct age can help you avoid paying these taxes to a certain degree.
Precious Metals Roth IRA: A Roth gold IRA uses after-tax money to fund investments. You do not pay any taxes as long as it is a qualified distribution.
SEP gold IRA: SEP gold IRAs work the same as traditional SEP gold IRAs but with the inclusion of physical gold investments. They are designed for self-employed individuals and those who own small businesses.
Gold and Silver IRA
Gold, silver, platinum, and palladium are all potential precious metals for IRA investment. Although the general term for the accounts just says gold, most accounts accept various precious metals.
Just double-check with the provider when you make inquiries about opening that you can invest in other precious metals and not only gold.
Managing Your IRA Gold and Silver Accounts
The process of managing your gold IRA is actually quite straightforward. Your account with have an appointed custodian, who is responsible for managing purchases. Most gold IRA companies also charge a small account handling fee to keep things running smoothly.
Your contribution to the management of the account predominantly lies with the directing of funds. These are 100%% self-directed accounts- so only you can decide when, where, and how the money is spent. You are also responsible for managing withdrawals and paying tax fees for early withdrawals.
The Best Silver and Gold IRA Companies
When choosing a gold IRA company, you need to ask yourself the following questions.
Is this a trustworthy company?
What is the minimum investment requirement to open an account- and can I afford it?
Are the custodian and storage arrangements covered?
How much are the fees?
What services are included?
Do they have a customer service support team?
What kinds of precious metals do they sell?
The best gold IRA company is the one that ticks the right boxes for you. Find out all the crucial facts about the provider before picking one. Here are a few big names to consider.
There are many more out there- but these are a few of the top competitors to look at.
What makes a precious metals investments company worth considering? In short, they offer a good balance of products, services, and support.
Some of the most important things to look out for are the facilities they use for storage, their ratings with the Better Business Bureau and Business Consumer Alliance, and their certification of approval from the IRS for any custodian services they provide.
Where to Open a Gold Self-Directed IRA
You can open an account with one of several top gold IRA companies- it all depends on which one sounds right for you. It is essential to choose a reputable gold IRA company with plenty of references to draw from.
Most of these services are 100% online-based. You simply visit the official website and open an account there- or arrange a consultation over the phone to begin the setup process.
When to Open a Self-Directed Gold IRA
With any investment, timing is crucial. The gold market is volatile- and the value of precious metals changes regularly. Like any stock or bond, the best time to buy is when the price is down. That way, you have a chance of earning profits when the price goes up, and you sell it on.
Even if you don’t touch it for a while, you could still benefit from increased value because it makes your wealth bigger on paper.
In terms of when is best, there are some other considerations to make as well as the current gold prices.
Inflation rates
Political tensions
Gold news
Your savings plan
How long you have left until retirement
It is never too early to start planning for retirement- so you can open this type of account at any age.
The Benefits of Gold IRA Investments
Hedge against inflation
Diversify your portfolio
Low-risk investing
Tax benefits long-term
Potential value appreciation
Security in times of economic turmoil
Approved Gold Coins in IRA Investing
One of the most popular product groups for precious metals investing is gold coins. There are many varieties- some currency, some collectibles- but not all types are accepted by the IRS for gold IRA investors.
The general rule of thumb for any gold coins in an IRA account is a minimum of 99.5% purity. Some of the most popular choices include:
American Gold Buffalo
Canadian Maple Leaf
Australian Gold Kangaroos
Australian Gold Philharmonic
Interestingly, there is one exception to the purity rule for gold coins: the American Gold Eagle coin- which is only 91.67% pure. It is approved by the IRS because it still contains one full ounce of gold- since it is a much bigger coin than most.
Collectible and commemorative coins are not IRS-approved coins for IRA investments- nor are many other popular coins, including South African Krugerrands, US Liberty Coins, and Chinese Panda Coins.
Any coins purchased with IRA funds should be in mint condition and have a certificate of authenticity.
Approved Gold Bar and Gold Bullion IRA Investments
Gold bullion and bar investments have the same regulations as coins: 99.5% purity. Most of the popular gold bars used by IRA investors are actually 99.9% pure- just to be safe.
Some of the common gold bars bought by investors include:
Credit Suisse Gold Bars: Produced in Zurich, the Credit Suisse 99.9% pure gold bars are arguably the most popular large bar asset.
Valcambi Gold CombiBar: The Valcambi Gold CombiBar is especially popular because it can be broken into 50 mini bars weighing one gram each.
Johnson Matthey Gold Bar: Although less common than the previous two gold bars on this list, Johnson Matthey bars are considered amongst the best options for large-scale IRA investments.
How to Open a Precious Metals IRA
If all this sounds good to you, the next question you have may be how to get started. It is easy- simply visit one of the trusted gold IRA companies listed here- or another one that you believe has a reputable reputation and speak to someone about opening an account.
The process is as follows:
Speak with a gold IRA expert.
Decide what type of account you want.
Provide the relevant details and pay the required account fees.
Arrange a rollover or transfer funds from another account (remember to complete all transactions within 60 days).
Decide what products you want to invest in, and have your account custodian arrange the purchase.
Wait for confirmation of purchase and deposit of physical assets in storage.
That’s it- in just a few steps, you have a versatile IRA savings tool that broadens your horizons and opens up new possibilities for your financial future.
Summary: A Gold IRA Benefits Long-Term Savings Plans
Precious metals investments are not for everyone, but they are becoming more and more popular for retirement savings plans. Diversification is the key to balanced, manageable investing with controlled risk and some element of security- and throwing a safe-haven asset such as gold in the mix is usually beneficial.
The best gold IRA companies make opening and managing an account easy and convenient- and they provide all the necessary support for keeping your gold secure and your transactions above board as far as the IRS is concerned. It is worth comparing a few of the top names to find the right fit for you.
If you are considering investing in precious metals through a gold IRA, remember to speak with your financial advisor about the best way to move forward.
About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.