The hand holds a gold bar on the background of a laptop on which there is a trading price chart. One ounce of gold in hand. Trading gold on the stock exchange and Forex.
If you’ve put any time into planning for retirement, you’ve no doubt heard of individual retirement accounts (IRAs). These savings accounts offer tax advantages for those who want to build financial stability over the long-term. With the increasing popularity of precious metals, it’s no surprise that Gold IRAs have enjoyed a surge in demand.
The first question many people have is “what is a gold IRA?” The answer is very simple. They’re normal individual retirement accounts that allow investing in precious metals. Of course, there are various differences between these and other retirement accounts. Understanding how they differ will help you make a smarter investment decision.
If you’re thinking of planning for retirement, you’re already on the right path. However, once you have an improved understanding of your options, you’ll be in a better position to achieve financial stability. At Silver Gold Bull, we hope this guide will get you to that point.
To understand what you need to know about a gold IRA, you must first know the basics about individual retirement accounts. These self-directed accounts allow anyone with earned income to contribute to a retirement fund and secure tax advantages. They’re very similar to 401(k) plans, but you don’t have to go through your employer.
While most IRAs do not allow their owners to invest in gold, there are some companies that make this their primary focus. In addition to gold, these funds also offer the ability to invest in silver, platinum and even palladium. Since these are specialty accounts, they must remain separate from normal IRAs.
You can set up gold IRAs with either pre-tax funds or as a Roth IRA using post-tax money. Unfortunately, these retirement accounts typically cost more than others. That’s because custodians must manage them.
And while you can buy physical bullion in some IRAs, many invest in “paper gold.” These come with many of the traditional disadvantages of mutual funds, stocks and exchange-traded funds.
Since many precious metal IRAs invest in “paper gold,” their differences with physical bullion are very apparent. Of course, this changes when you look at accounts that can hold physical precious metals. Still, there are a variety of differences between the two.
One major issue that stands out relates to storage. When you typically store gold at home, you don’t have to worry about taxes until you sell it. If you keep your physical bullion at home with a gold IRA, though, it’s considered a withdrawal. This means you’ll need to pay taxes on it.
In many cases, storing your own bullion isn’t even an option. The IRA trustee typically has to control the precious metal. This is in addition to abiding by fineness standards issued by the IRS — which means investing in lower-karat products will not even be an option for you.
Many people see the differences between gold IRAs and bullion as disadvantages in their own right. As it turns out, though, there are many other drawbacks you’ll encounter. Some of these have less to do with precious metals and relate more to the basics of individual retirement accounts.
Here’s what you can expect:
Every IRA has contribution limits. In recent years, this limit has been around $6,000. If you’re over the age of 50, you can typically contribute a small amount more. For those looking to make major investments in gold, this can be a significant hindrance.
Many people who buy gold coins and bullion do so because they want physical precious metals in their possession. If something happens and you need to withdraw from your gold IRA, you’re certainly allowed to do so. If this occurs before you turn 59 years and 6 months, though, you’ll pay a penalty.
When someone reaches the age of 72, they must take out required minimum distributions (RMD). This is only the case if you have a traditional gold IRA, but it means you have no other choice but to withdraw some of your gold from the account periodically.
If you want to convert your investment to cash, this can create a problem. What if you have to withdraw your precious metals when the price of gold is on the decline? This can seriously eat into your retirement fund and minimize the profits you otherwise could have seen.
While the disadvantages of gold IRAs are many, some people still want to use them for retirement. If you fall into this category, it’s important that you at least choose the right company. The following list features established precious metals IRA providers.
While these are among the most popular options, that’s no guarantee that they’re the right choice for you. You should still do your own research before putting money into an IRA. The companies on this list, however, will give you a good jumping off point:
The unfortunate fact is that there are many less reputable companies out there. You’ll find many of them advertising doom and gloom to scare folks into starting a gold IRA. By focusing on the best options available, though, you can minimize the risk your retirement funds will face.
Con artists have long tried to take advantage of people saving for retirement. As the price of gold climbed in recent years, many of these scammers began targeting precious metal investors as well. This makes it imperative that you avoid gold IRA scams.
Unfortunately, many of these scams are completely legal. That’s because certain actions — such as high-pressure sales tactics — aren’t necessarily against the law. If you stay on the lookout for the following potential swindles, though, you’ll reduce your risk of victimization:
Investing in retirement isn’t something that needs to be “sold.” It’s something we should all do. If you run into a pushy salesperson, though, it’s likely that they’re more interested in their own bottom line.
Have you heard someone say “gold can only go higher”? Have you received a “once in a lifetime opportunity”? Is the salesperson trying to rush you? In each of these cases, you might end up not getting what you pay for.
Gold IRAs hold several types of coins and bars. When you’re investing in only one type, you should choose bullion. Salespeople with IRA companies, however, may try to convince you to buy rare or proof coins. Unfortunately, you’ll end up paying more since their value relies on rarity.
This can lead individual investors to lose tens of thousands of dollars instantly. You want to invest in gold because gold is valuable — not because an item is rare or collectible. Numismatic value can easily shift, so avoid using rare items in gold IRAs.
Some companies that offer precious metal IRAs use shady tactics. You may also run into companies that don’t exist at all. Authorities have seen scam artists offer phony IRAs just to get victims to transfer their money.
What happens once the transfer is complete? The money is essentially gone. Never give out your information to someone who contacts you unsolicited. You should also research any company you’re considering investing with before doing so.
If you want to invest in gold for retirement, the best method may be to avoid gold IRAs completely. While there are certainly reputable options out there that won’t victimize you, you’re simply not getting what you pay for with these individual retirement accounts.
Even if everything goes smoothly and the value of your account rises, you’ll still end up paying a variety of fees unrelated to precious metals. By buying gold and keeping it yourself — or using secure precious metals storage facilities — you can avoid these sorts of disadvantages.
Regardless of how you invest for retirement, the important part is that you invest. A depressingly high number of Americans have no retirement savings at all. Of course, not all investments are equal when building financial stability. Gold IRAs may seem like an easy way to back your retirement with precious metals, but it’s hard to overlook their disadvantages.
At Silver Gold Bull, it’s our goal to help every client make the best investment decision possible. With precious metal individual retirement accounts, we simply don’t see the benefit of foregoing alternative investment strategies. If you’re planning on putting money into a gold IRA, at least consider purchasing your own bullion.
If you want more control over your retirement, store your own gold and diversify with other investments. You can get started by visiting our Gold Bullion Products page today. Securing your financial future doesn’t have to be difficult when you’re making smart investment decisions.
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