An IRA gold account allows you to invest in precious metals such as silver, platinum and palladium. This type of retirement account is similar to a traditional individual retirement account in that contributions and earnings are tax deferred until you retire. Gold and other precious metals are used as diversifiers in investment portfolios, due to their historically low correlation with stocks and bonds. However, there are some important things you should know before investing in a gold IRA.
While a gold IRA offers the benefit of holding physical bullion rather than paper certificates, it’s important to remember that there are still fees associated with this type of investment. There is typically a one-time fee to open the account, annual administrative and storage costs for the precious metals depository and transaction fees to buy and sell metals. These fees can add up and eat into your investment gains over time.
If you want to avoid these fees, there is another option for purchasing IRA-eligible gold. Instead of storing your bullion at an IRS-approved facility, you can elect to have your precious metals delivered to your home or other location. However, this can have significant tax ramifications if you don’t follow the proper guidelines. For example, if you own an IRA with an approved dealer, it is against IRS regulations to have the dealer ship your metal directly to your home.
Another option is to invest in a trust that holds physical precious metals. A recent letter ruling issued by the IRS states that this method is allowed if the trust owns the gold and it’s held by an independent trustee who doesn’t receive compensation for the purchase or sale of the metal. However, many experts advise that this type of investment is not as liquid and isn’t a good alternative to direct physical purchases.
Regardless of the route you take, the most important thing to remember is that IRA-eligible precious metals must be shipped directly from the dealer to the custodian or to an IRS-approved depository. Additionally, the IRS rules specify that only gold, silver and platinum can be included in a precious metals IRA and must meet purity standards of 99.5% and higher. If your IRA gold does not meet these requirements, you could face serious penalties when you attempt to withdraw it from your retirement account. Be sure to work with a reputable, full-service precious metals IRA custodian that can provide you with all of the information you need before you decide to make this type of investment.
