Gold IRA

What Are Gold IRA and How Do They Work?

A Gold IRA or Precious Metals IRA is a self-directed account that allows you to fund your retirement plan with gold or other approved precious metals. 

When you invest in Gold IRAs, you’ll have to prepare for a more complicated transaction. 

Here’s the gist: You must work with a custodian along with a qualified depository. Then purchase IRS-approved precious metals and have them shipped to the storage facility while making sure your custodian takes account of it.

 And of course, these imply fees you’ll need to pay later!

You’ll also have to watch out for specific IRS rules to avoid penalties. For instance, the IRS does not allow all gold products; you can only invest in selected bullions, bars, and coins that meet their requirements. 

If you’re wondering whether you can skip the storage fees. The answer is no. The IRS also specifies that you can’t store precious metals within a self-directed account at home nor in a safe-deposit box. This will be treated as a taxable IRA distribution. 

Along with the complex standards you need to follow, Gold IRAs do entail higher costs. Our recommended Gold IRA companies are highly qualified and should be able to help you with any investment needs.

Gold IRA Ultimate Guide 2022

What do you get by putting your money in a gold IRA? You’ve heard many investors say it provides “balance” and “stability” for your portfolio — a hedge against volatility and security against political upheaval. But, is it the right move for you? 

Unlike a traditional IRA, a gold IRA account tends to be more complex as it comes with extra rules and more fees attached. 

To help you get started with Gold IRA, we’ll share: 

  • What to look for in Gold IRAs
  • The risks and benefits of investing in one

  • What are the IRS-approved precious metals for IRA use
  • The top 3 Gold IRA companies worth investing this year

The Benefits of Gold IRAs

There are many benefits to investing in a gold IRA, including:

Diversification:

By including gold in your portfolio, you can help protect yourself against stock market volatility.

Inflation Hedge:

Gold tends to move independently of other asset classes and provides a hedge against inflation.

Control:

Because gold IRAs are self-directed, you have the freedom to make your own investment decisions.

Tax Benefits:

Gold IRAs offer the same tax advantages as regular IRAs. Contributions to traditional gold IRAs are tax-deferred. While qualified withdrawals to Roth gold IRAs are tax-free.

Growth Potential:

Gold prices have surged in recent years, reaching all-time highs. By investing in gold, you may realize significant gains in your investment.

Safety:

Gold prices never decline to zero, unlike paper assets.

The Risks of Gold IRAs

There are also a few risks you need to consider:

Restrictions on funding:

You cannot move any precious metals already invested in your gold IRA. You are also not allowed to purchase metals and transfer them to your IRA by yourself. A custodian must take charge of all these transactions on your behalf.

Inflation Hedge:

There are several fees associated with gold IRAs, including setup fees, annual maintenance fees, and storage fees.

No Tax-Advantaged Earnings:

Unlike regular IRAs, you do not gain interests or dividends from gold bullion. So, you don’t really get to enjoy tax-free growth. Although you do get a break from capital gains tax from any earnings on selling your gold.

Types of Gold IRAs

There are two main types of gold IRAs: traditional IRAs and Roth IRAs. Both types of accounts offer certain tax advantages and allow you to hold gold and other precious metals as investments.

Traditional IRAs

These are funded with pre-tax dollars. Contributions and earnings made in the account will grow tax-deferred until withdrawal. That means you would not pay any taxes on your contributions and gains at all. 

You may also get tax deductions in some or all your contributions based on your income level. If you’re not eligible for the tax deductions, then you will also not be taxed on your contributions upon withdrawal. But, any gains in the account will still be taxable as regular income. 

Learn more about Traditional IRAs in this guide.

Roth IRAs

Contributions made to Roth Gold IRAs are funded with after-tax dollars. Unlike traditional IRAs, you won’t get immediate tax advantages. But in return, you won’t get charged with taxes on withdrawals.

In other words, you’ll pay taxes for the money going into your account. But once you take distributions, it will be totally tax-free. 

Learn more about Roth IRAs in this post.

IRA-Accepted Precious Metals

Originally, the Internal Revenue Service (IRS) only allowed the American Eagle Gold coin to be included in an IRA account. 

With the Taxpayer Relief Act of 1997, the IRS broadened its accepted precious metals for IRA investments. Here’s a complete list of IRA-accepted precious metals. 

Gold

  • American Gold Eagle proof 

  • American Gold Eagle bullion 

  • American Gold Buffalo uncirculated  (proofs not allowed)

  • Australian Kangaroo/Nugget 

  • Austrian Gold Philharmonic 

  • British Gold Britannia coins (from 2013)

  • British gold Shēngxiào Lunar Series British 

  • British The Queen's Beasts 

  • Canadian Gold Maple Leaf 

  • Chinese Gold Panda 

  • Gold bars and rounds released by a NYMEX or COMEX-approved refinery or the national government.

Silver

  • American Silver Eagle proof 

  • American Silver Eagle bullion 

  • Australian Silver Kookaburra 

  • Austrian Silver Philharmonic 

  • British Silver Britannia coins (from 2013)

  • British silver Shēngxiào Lunar Series 

  • British The Queen's Beasts 

  • Canadian Silver Maple Leaf 

  • Chinese Silver Panda 

  • Mexican Libertad 

  • Silver bars and rounds released by a NYMEX or COMEX-approved refinery or the national government.

Platinum

  • American Platinum Eagle 

  • American Platinum Eagle proof 

  • Australian Platinum Koala 

  • British Britannia (from 2018)

  • British The Queen's Beasts 

  • Canadian Platinum Maple Leaf

  • Isle of Man Noble 

  • Platinum bars and rounds released by a NYMEX or COMEX-approved refinery or the national government.

Palladium

  • American Palladium Eagle bullion coins

  • Canadian Palladium Maple Leaf coins

  • Palladium bars and rounds released by a NYMEX or COMEX-approved refinery or the national government.

How to Invest in a Gold IRA

If you’re ready to invest in a Gold IRA, be sure to closely follow these steps:

1

You’ll be working with a qualified financial institution to set up the program. 

2

The employees will select either a traditional or Roth IRA and authorize payroll deductions. 

3

You will then withhold and transmit the authorized amount to the financial institution. 

How to Invest in a Gold IRA

If you’re ready to invest in a Gold IRA, be sure to closely follow these steps:

1. Find an IRA Custodian

The very first step is to open a self-directed gold IRA with a custodian. You can work with a bank, a trust company, or a brokerage as long as they’re IRS-approved. However, many mutual fund companies and financial services that provide regular IRAs don’t usually offer self-directed IRAs.

2. Choose a Precious Metals Dealer

The precious metals dealer will be in charge of making the actual purchase. But you’ll need to direct the custodian first to transfer the necessary amount to the dealer. We recommend you choose one that’s connected with trade groups such as the Industry Council for Tangible Assets (ICTA), American Numismatic Association (ANA), or Professional Numismatists Guild (PNG) to ensure the dealer company’s reliability.

3. Fund Your Account with a Contribution

You’ll be making contributions subject to certain contribution limits. Or you can make a transfer or a rollover from a qualified plan, like a 401 (k) or a 403 (b).

4. Select a Depository

You must also choose an insured IRS-approved depository that’ll store all your precious metals. You can find one on your own, or you can also go with your custodian’s recommendation. 

IMPORTANT: Storing your precious metals in an IRA account, at home, or in a safe-deposit box is prohibited by the IRS.

5. Complete your purchase

You can now select from the list of IRS-approved products. Remember, these products must meet the IRS “fineness” and “purity” standards. Once you’re with the purchase, your custodian will take care of the payment while the dealer will be shipping the precious metals to the depository.

Gold IRA Special Fees

Gold IRA come with certain fees that vary depending on the provider. But generally, you’ll be facing the following:

Setup Fees

This is a one-time fee that’ll establish your gold IRA account. The setup fees depend on the institution, and you may be charged with higher fees since not all financial services companies offer one. 

Broker’s Fee

Brokers or Gold IRA providers usually put markups depending on what coins, proofs, or bullion you’ll invest in.

Storage Fees

Your precious metals must be held in an approved facility.

Custodian Fees

These may also be higher than regular IRAs, especially if you’ll need to go to a different institution than the one already holding your other accounts.

Cash-out Fees

When you close out your gold IRA by selling it to a third-party dealer, they may want to pay less than what it sells for in an open market. In this case, you may have paid or lost a certain amount by closing your gold IRA.

Top 3 Gold IRA Companies to Consider

When it comes to precious metals IRAs, there are a handful of reputable companies that investors can trust. Below is a list of some of the best companies in this industry:

Our Rating: 4.9/5

GoldCo

★ Excellent scores on customer service

★ Flat annual fee with zero surprises

★ Gold IRA set up and rollover experts

★ 5-star rating from 1,000+ verified reviews

★ INC 5000 recognition for 5 years

★A+ Rating on BBB

Considered as one of the fastest-growing companies in Los Angeles, GoldCo is a privately held firm that offers an extensive collection of gold and silver coins for IRA use. GoldCo’s clear website and great support for beginners have paved its way to 15 years of success in the industry. 

Along with wealth and asset protection, GoldCo IRA experts will assist you step-by-step with setting and rolling over your account. It also has a buyback program that offers competitive rates for any precious metals you sell back to them. 

What makes GoldCo stand out from the rest is they always ensure your gold IRA investment goes smoothly.

Our Rating: 4.7/5

Augusta Precious Metals

★ First Gold IRA provider with in-house compliance department

★ TrustLink “best of” list

★ Voted “Most Trusted in U.S.” in IRA Gold Adviser

★ Stevie Awards for Customer Service Success

★ National Ethics Association member

Outstanding track record! Augusta holds true to its stellar reputation having zero complaints on accredited business review sites like BBB, TrustLink, and ConsumerAffairs. We’ve thoroughly reviewed the provider, but we failed to find any unresolved complaints. 

Another plus for investing with Augusta is its very solid customer education. It offers a free web conference on gold and silver IRAs to new clients. Harvard-educated analyst Devlyn Steele will answer all your questions. You can even opt for a one-to-one video call option if you want!

Our Rating: 4.5/5

Noble Gold

★ Highest customer care

★ Low minimum investment of $2,000

★ Top-notch security + proof of purchase

★ No-qualms buyback program

★ Large options for collectibles (gold, silver, palladium, platinum, and rare coins)

If you’re looking to invest in more unconventional precious metals, Noble Gold might be for you! Unlike most providers, it hosts a wider variety of precious metals. You can purchase gold, silver, platinum, palladium, and rare coins. It even offers Royal Survival Packs that let you keep physical bullion at home for emergency purposes.

Another reason you may want to invest with Noble Gold is its free setup fees and a low minimum purchase of $2,000 for precious metals IRAs.

Although Noble Gold is rather new to the market, it has a solid social media presence. So, you can always keep updated with their offerings through their Facebook, Twitter, or Instagram accounts. 

FAQS ABOUT GOLD IRAS

Can I hold gold in my IRA?

Yes, certain IRS-approved gold and precious metals are allowed to be held in your IRA.

What types of gold can I hold in my IRA?

You can hold IRS-approved gold coins and bars in your IRA.

How do I store gold in my IRA?

How do I store gold in my IRA?

What are the taxes on gold IRA withdrawals?

Withdrawals from Traditional Gold IRAs are taxed as ordinary income, while withdrawals from Roth Gold IRAs are tax-free. There’s also a 10% penalty on early withdrawals (before age 59 ½).

What happens to my gold IRA when I die?

Your Gold IRA will be transferred to your beneficiary or beneficiaries. When you establish the account you’ll be required to name your beneficiaries and you may update it at any time.

Will I have to make RMDs with a Gold IRA?

Yes. You must take Required Minimum Distributions (RMDs) when you reach the age 70 ½. With Gold IRAs, you can take your RMDS in cash by selling precious metals. Or “in kind” if you want your precious metals sent directly to you.

Alternatives to Gold IRAs

Gold IRAS can be a great way to invest in gold but they're not the only option. Here are some of the main ones most investors consider: 

1. Purchasing Stock in Gold Miners

You can invest in the stock of companies that trade, mine, and refine gold. This is a much more straightforward option since you can invest using your brokerage account. Take note, though, shares of stock of gold companies are not just based on gold prices but on each company’s performance as well. That means it carries the same risks as stocks.

2. Gold ETFs and Mutual Funds

If you want exposure to long-term stability while having more liquidity, investing in Gold ETFs and Mutual Funds may be the right choice for you. Just beware, like stocks you technically aren’t buying gold, but the paper that’s backed by equity or debt of mining companies.

3. Bullion or Coins

You may also want to purchase a physical gold bullion or coin. With this, you’ll be interacting with dealers beyond traditional brokerages and also need to pay for storage and purchase insurance for your holdings.

4. Trading Gold Futures and Options Contracts

Among the options we’ve listed, this is perhaps the riskiest one. Both are a form of speculative investment, which means there’s a high level of potential loss involved. If you choose to invest in gold through futures and options contracts, you’ll have to actively monitor your investments so they can be exercised, rolled over, or sold before they become worthless.

Final Thoughts: Should You Get a Gold IRA?

Gold IRA investing is a good option for those looking to protect their savings, to diversify their portfolio, or to hedge against inflation. Still, there are certain drawbacks you should consider, such as higher fees and complexity in managing the account.

Remember, the decision comes down to your needs and goals. Always check the facts and consult with a financial advisor before putting your money in gold. Invest smartly!

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