There are two ways to invest in gold using an IRA. One option is to set up a self-directed gold IRA, which allows you to buy physical gold and silver with retirement funds. To invest in gold with an IRA, you must follow two IRS guidelines. First, you can only invest in IRS-approved gold.
While the list of approved options is changing, the IRS says it must be “highly refined precious metal.” 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. Gold IRA companies vary in terms of experience, service, and costs. So take a look around and compare your options before you proceed with opening an account. For example, you could have an IRA that invests in precious metals and an IRA that invests in liquid assets such as listed stocks and mutual funds.
IRS rules allow funding a Gold IRA with funds from another IRA, 401 (k), 403 (b), 457 (b), or Thrift Savings Plan. Examples include American Gold Eagle coins, Canadian Maple Leaf gold coins, American Silver Eagle coins, American Platinum Eagle coins, and gold, silver, platinum and palladium bars (bullion) that meet applicable purity standards. If you withdraw gold from your IRA before you’re 59½ years old, you’ll be charged income tax on the value of that gold, as well as a 10% penalty for making an early withdrawal from a retirement account. Gold IRAs follow the same general rules as traditional IRAs when it comes to tax benefits. You can choose between a traditional IRA or Roth IRA contribution limit and withdrawals.
You don’t want to fund a gold IRA with cash because you’ve already paid taxes on that money, and the point of using an IRA as an investment tool is to take advantage of the tax advantage that comes with using pre-tax dollars. You can invest in gold stocks, such as stocks of gold mining companies or gold licensing companies, which help finance mines. Unfortunately, most Gold IRA companies don’t have a good record of fee transparency on their websites, so finding out the details may require a phone call or two. Make sure you check the list of approved gold objects with your custodian manager before you deposit gold into your IRA.
Annual fees are generally charged by the account custodian, and storage and insurance fees are more often owed to the custody account than to the Gold IRA company. Your custodian bank can refer you to an approved institution and process the gold transfer as part of setting up your Gold IRA. They sell gold coins, gold bars, and the like, but they don’t offer IRA investment advice (regardless of what their websites or other marketing materials might suggest). A gold IRA is an alternative investment option for retirement savers who want to own gold as an inflation hedge or to diversify their assets outside the stock market.
An even more indirect way to invest in precious metals is to have your IRA buy common stock from mining companies.