Gold IRAs appeal to investors who want a diversified retirement portfolio. There are alternative methods to add gold to your IRA. Gold ETFs allow you to buy and sell stocks and hold them in a conventional IRA or 401 (k). Another advantage is that no minimum amounts and no special accounts are required.
In general, alternative asset classes should not exceed 5 to 10 percent of your total investment portfolio for retirement. This depends on your investment objectives and risk tolerance. Gold IRAs can be used to diversify your retirement portfolio, protect against inflation, and earn tax-deferred income. If your portfolio is already diversified with other investments, including stocks and bonds, you might want to include some gold as well.
Additionally, gold is a bit volatile and may not be the best choice for someone looking for consistent returns. While the majority of IRAs invest in more traditional assets such as stocks, bonds, and cash equivalents, tax legislation also allows “self-directed vehicles” that can hold precious metals such as silver or gold. An important rule to know about how to keep physical gold in an IRA is that your precious metals MUST be stored with an approved depository such as the Delaware Depository Service Company or Brink’s Global Services, not at your home or in a locker. If you need advice, you should contact a trusted advisor rather than relying on representatives from the Gold IRA company.
Many Gold IRA companies have preferred custodians, which they either recommend or require from customers, or you can search for a custodian via the RITA website. They also perform the necessary administrative functions to ensure that your Gold IRA complies with all IRS regulations. There are minimum requirements for the fineness or purity of metals, as well as regulations for the size, type, and weight of your IRA gold. By setting strict parameters for defining IRA gold, the IRS can ensure that people keep investment-grade assets in their self-directed gold IRA, as opposed to collectibles, which are not eligible for preferential tax treatment.
As with other retirement accounts, if you withdraw gold from your IRA before you reach 59½ years of age, you must pay income tax on the value of the gold plus a 10% advance deduction fine. To help customers avoid this threat, for example, some IRA companies are buying their gold back at the wholesale price in force at the time. You want to choose a Gold IRA company that is transparent, straightforward in terms of fees, and has a good reputation. Consult reputable external sources or a paid financial planner for investment advice if you’re unsure whether a Gold IRA is right for you.
Proponents of Gold IRAs argue that these costs are worth protecting against a potential financial apocalypse. IRS rules allow funding for a Gold IRA with funds from another IRA, 401 (k), 403 (b), 457 (b), or Thrift Savings Plan. The advantage of gold ETFs is that you can buy and sell stocks like a stock and hold them in a conventional IRA or 401 (k). No special account is required.