The term Gold IRA refers to a specialized type of individual retirement account (IRA) that allows investors to hold gold as qualified retirement investments. Investors may be allowed to own other approved precious metals, such as platinum, palladium, or silver. Investors with these accounts can hold physical metals such as bullion or coins, as well as valuable metal-related stocks.
Gold IRA accounts must be kept separate from a traditional retirement account, although things like contribution limits and distribution rules remain the same. Investors can open gold ira companies through a stockbroker or other custodian.
Key takeaways
- A Gold IRA is an IRA that allows its investors to hold gold coins or bullion or other precious metals as investments.
- You can set up a gold IRA account with pre or post tax dollars through a special custodian or broker.
- The IRS allows self-guided IRA account holders to purchase gold, silver, platinum, palladium bullion, coins, or other approved physical forms.
- They typically charge higher fees than regular IRAs as they require the actual purchase and storage of the metal.
Understanding IRA Gold Accounts
Individual retirement accounts are tax-advantaged accounts that help people save for retirement. They come in a variety of forms, including traditional IRAs, wheel IRAs, and gold IRAs. As mentioned above, a gold IRA allows investors to keep their money in gold and / or other precious metals. These accounts must be kept separate from ordinary IRA accounts.
Gold IRAs, also known as Precious Metal IRASs, can be set up with pre-tax funds or as a Wheel IRA, purchased with after-tax money. Unlike other IRAs, these accounts require the purchase and storage of the physical asset. As a result, Gold IRAs require the use of a custodian, usually a bank or brokerage firm that manages the account.
The term Gold IRA is primarily used to describe a self-directed IRA with funds invested in hard metals.
Traditional IRAs allow investors to hold fair stocks, mutual funds, or other traditional investments. The Internal Revenue Service (IRS) allows self-directed IRA account holders to purchase bars and sworn coins of gold or other approved precious metals, such as silver, platinum, or palladium.
Gold IRA funds can also be invested in gold-related paper investments such as exchange-traded funds (ETFs), stocks of gold mining companies, precious metal mutual funds, or precious metal commodity futures.But remember that these accounts have higher fees because they require you to buy and store precious metals.
Special Considerations
You cannot set up a gold IRA account with traditional custodians like ordinary brokers. These companies do not offer specialized accounts like Gold IRAs. If you are interested in setting up such an account, you will need to look for a custodian or specialized company that can handle all the documentation and reporting for tax purposes necessary to maintain a gold IRA.
While assets may differ from traditional IRAs, the rules are the same. This means that you cannot exceed your annual contribution limits. The IRS has set contribution limits for tax year 2021 at $ 6,000. If you are age 50 or older, you can send an additional $ 1,000 for a total of $ 7,000.You can start creating a distribution without incurring any penalties from your IRA after you turn 59 1/2. Withdrawals made before that age are subject to an additional 10% tax.
Storage is a consideration for those with Gold IRAs. You must keep your physical gold in an IRS-approved facility, such as a bank or other warehouse. You can also keep it with an approved third party. This means that you cannot store your assets at home. If you do, it counts as a withdrawal and you will have to pay taxes.
The contribution limits for the Gold IRA are the same as for any other IRA, so be sure to check with your financial advisor to make sure you don’t exceed that amount.
Advantages and disadvantages of IRA Gold accounts
Is it a good idea to keep a gold IRA? For most of recent history, the answer is no. Gold must be stored, does not pay dividends and does not generate profit. It has industrial and jewelry uses, but for the most part, most of the yellow metal is found in bank vaults and safe deposit boxes. People believe it is a sure source of value when times are tough.
Gold soared in the early 1980s, then hovered in the $ 400 to $ 500 per ounce range until around 2006. Gold peaked above $ 1,700 per ounce during the financial crisis. Since then, it has traded in the $ 1,100 to $ 1,300 range. That means the gold went all over the place for the most part. Meanwhile, if you invested in the broad stock market from 1982 to 2006, your IRA would increase fivefold.
This is not to say that precious metals have no place in your portfolio, but if history is any guide, gold will have to go a long way to match the overall economic performance measured by overall markets.