For some investors, gold is an attractive asset for retirement investments. Gold provides an additional source of diversification and is (perhaps mistakenly) seen as a hedge against volatility. Therefore, a gold IRA can be a safe haven when it comes to inflation. By opening a self-directed IRA, you can invest in alternative assets such as real estate, physical precious metals, and cryptocurrencies.
Gold can certainly have a place in a well-diversified portfolio, but it’s important to weigh the risks of buying gold compared to other assets. These include recommendations for IRAs or leveraged purchases, which incur expensive monthly fees for administration, processing, storage, or insurance, the purchase of collector coins with high premiums and low liquidity, and the development of retirement savings, in which many Americans keep the majority of their fixed assets. This is in contrast to the more common assets that regular IRAs are limited to, such as cash, stocks, and bonds. Before you open a gold IRA, keep in mind that it’s not the only way to invest in gold with your retirement funds.
Gold IRAs are usually defined as alternative investments, meaning that they are not traded on a public stock exchange and require specialized expertise to value them. Many investors choose gold to diversify their portfolio, either by investing in a gold IRA or buying the metal outright. Gold IRA rules require that you store eligible precious metals with a national depositary, bank, or IRS-approved trustee. The IRS does not allow popular gold coins such as the South African Krugerrand or British sovereign coins to be stored in a gold IRA.
Gold purchased for a Gold IRA cannot be stored in a home safe, a safe deposit box, a shoe box in your bedroom closet, or anywhere else besides a deposit, bank, or credit union. If gold seems like a solid choice for you, Sentell suggests investing no more than a third of your retirement savings in a gold IRA. To continuously receive this benefit, IRA assets must be held by a financial institution or IRS-qualified IRA custodian, according to the Industrial Council for Tangible Assets. These investments are available in a normal brokerage IRA, which means you don’t have to go through the work and additional costs of setting up a self-directed gold IRA.
Custodian banks help you manage the paperwork and tax reporting for your gold transactions to meet IRS retirement requirements. The rules for withdrawing from a Gold IRA are similar to other individual retirement accounts. According to Brett Gottlieb, financial advisor and founder of Comprehensive Advisor in Carlsbad, California, you should first consider whether you want to make a physical investment in your portfolio and not in stocks or investment funds from gold companies or an Exchange Traded Fund (ETF) that tracks a gold index.