The term gold IRA refers to a specialized individual retirement account (IRA) that allows investors to hold gold as a qualified retirement plan. Investors with gold IRAs can hold physical metals such as gold bars or coins as well as securities related to precious metals in their portfolio. IRA-eligible gold coins, bars, and coins must meet a number of requirements set out in the Internal Revenue Code in order to be stored in a self-directed IRA. You have complete control over the purchased gold and the custody account as long as both are approved by the IRS.
The IRS has issued private letter rules to major gold ETFs, which state that IRAs may own the ETFs. If you’re considering a gold IRA, you should always do so as part of your wider investment strategy, taking into account your time horizon until retirement, your expected income needs, and your risk tolerance. Thanks to the Taxpayer Relief Act of 1997, which expanded the precious metal holdings allowed in IRAs by one, a half, a quarter, or a tenth of an ounce of U, storing your IRA gold at home can be considered a distribution, meaning you lose your tax-deferred benefits and can be punished with a fine if you are under 59½ years of age.
Gold is considered an inflation hedge, but holding gold comes at an opportunity cost because you can’t earn income in the form of dividends. Some investors believe that holding physical precious metals is less risky than investing (either directly or through funds) in gold industry stocks such as mining companies. If you need advice, you should contact a trusted advisor instead of relying on representatives from the Gold IRA company. Most gold IRA companies recommend or require that you work with a specific custodian and custodian, although some give you a choice of two or more.
Gold bars and round gold and silver coins are also allowed in an IRA if they have a fineness of 99.9%. The Gold IRA also sells you the gold bars and coins (or other precious metals) that you want to invest in your Gold IRA. With a traditional IRA or other retirement account, you can invest in gold through the stock market by buying stocks in mining companies or mutual funds that hold those stocks. To comply with the many regulations surrounding gold IRAs, you can’t store your gold at home or in a safe deposit box.
A gold IRA consists of a single asset class, and by eliminating the diversity you get with a traditional investment portfolio, you’re at higher risk and depriving you of the opportunity to earn income.
