Gold has always been a remarkable investment option since the dawn of civilization. Its vast benefits have attracted many investors, and it has the ability to hold value during economic uncertainty as well as value appreciation.
If you find gold appealing, you’ve probably wondered whether it’s worth to have gold in your Individual Retirement Account (IRA). Gold is primarily a collectible, and the Internal Revenue Service (IRS) doesn’t allow IRAs to hold collectibles. However, there are special IRAs for this job. They are called Gold IRAs.
What Is A Gold IRA?
Most IRAs are used to invest in traditional options, such as bonds, stocks, and even cash equivalents. If you want to have physical gold in your IRA, you have to open a specialized account. This account is what is referred to as a gold IRA.
Gold IRAs are regulated under the same rules and guidelines as regular IRAs. To open one, you’ll need to set up an IRA account with a custodian that’s willing to allow you to hold precious metals in your account.
Next, you need to buy gold and other precious metals such as silver, palladium, and platinum and transfer them to your account. Make sure you know gold investment basics before you dive in. Gold IRA can also hold gold stocks in gold production and mining companies, gold mutual funds, and gold exchange-traded funds (ETFs).
Also, note that you can’t just hold precious metals of any form in the IRA. They have to meet certain quality standards in their weight and purity. The IRS-approved depository must also be insured. If you’re using the account to hold gold coins, you are limited to only coins produced by some government mints.
Gold IRA Advantages
There are many gold IRA advantages. They include:
- Tax advantages: Gold IRAs offer the same tax benefits as ordinary IRAs. Qualified withdrawals are tax-free, and you have an option to protect your savings through portfolio diversification.
- Long-term holding: While the liquidity of gold IRAs is debatable, it’s best suited for a long-term buy and hold investment plan. You can hold the investment for decades and not access it until you retire.
- Full control: As mentioned earlier, the IRS has restrictions on the types and quality of precious metals you can buy and hold in a gold IRA. However, you have more control with a gold IRA compared to a regular individual retirement account. It gives you a grip on the market by being able to buy low and sell high. Also, if there’s a projected market dip, you can cushion yourself from any losses by selling your coins or bars. You can simply hold the assets in a money market fund until a more suitable time to buy again. Gold IRAs are self-directed, meaning you manage your portfolio and make all decisions regarding your investments.
Also, gold has held its value since ancient times. This makes it a safe investment option for an individual retirement account. It helps minimize the risks of inflation and other crises, such as political, financial, and economic crises. You don’t want to put all your money in a stock’s IRA and then lose it all during an economic depression.
Gold IRA Risks
Even with their vast advantages, gold IRAs also have some cons. They include:
- Hefty fees: It’s impossible to keep your gold investment at home or in your office. That would present a huge risk. You need to open a special account with a custodian. This account is insured, and your gold can be shipped and transported safely. This makes gold IRAs expensive. Other than the initial fee levied when setting up, other fees include annual custodian costs, management fees, and storage fees. These expenses vary depending on the trust company.
- Funding limits: If you already own gold before you open your gold IRA, you’re not allowed to deposit it into your account. Also, you can’t buy gold by yourself and deposit it into the account. The custodian has to carry out all the transactions on your behalf.
Unlike other common assets, a gold IRA also doesn’t pay interest, dividends, or other returns.
Is It Worth Investing In A Gold IRA?
Many investment experts’ answers to this question lie in both extremes. As you prepare for retirement, you need an investment option that generates income or appreciates in value so that you can sell it for a profit. Gold appreciates in value since its demand continues to rise while the supply is diminishing.
Having your gold outside an IRA sure presents its risks. A gold IRA helps you diversify your retirement investment options and also cushions you in times of economic uncertainty. It’s definitely wise to include gold in your IRA.