A Gold IRA often comes with higher fees than a traditional IRA or Roth IRA, which invests exclusively in stocks, bonds, and mutual funds. In retirement, you need an investment that either generates current income or that is reasonably expected to increase in value so that you can sell it and use it for consumption in the future. You’re essentially wasting deferred tax space on something that doesn’t generate income. As a result, you are not protected against taxes. As with any other traditional IRA account, the value of the account is taxable upon withdrawal.
Unlike owning stocks, mutual funds, ETFs, etc., gold IRAs can be a good or a bad idea, depending on your financial goals and how you integrate a Gold IRA into your overall financial plan. While the majority of IRAs invest in more traditional assets such as stocks, bonds, and cash equivalents, tax legislation also allows “self-directed instruments” that can hold precious metals such as silver or gold. Gold IRAs may be a good fit for people who have built up a large portfolio and want to diversify a small portion of their investments into physical assets.
Before you initiate the transfer, it’s important to calculate how much of the value of your existing retirement plan you’d like to invest in your new Gold IRA. If you really think it’s a good idea, at least check the IRS rules and custodian fees before investing gold in your IRA. While some people claim there are ways to physically take possession of gold in your IRA through loopholes, it’s generally not the smartest idea. You may be able to hold a gold ETF (Exchange Traded Fund) within most IRAs, as long as it’s an investment that your broker offers.
A common way to fund a new Gold IRA account is to use funds that are already held in another retirement account, such as another IRA, 401 (k), 403 (b), 457 (b), or Thrift savings plan, in accordance with IRS rules. Alternatives such as gold ETFs or stocks of gold mining companies may offer similar value depending on your investment goals. As with other retirement accounts, if you take gold out of your IRA before age 59½, you must pay income tax on the value of the gold, plus a 10% upfront penalty. By setting strict parameters for defining IRA gold, the IRS can ensure that people hold investment-grade assets in their self-directed gold IRA, as opposed to collectibles, which are not eligible for any preferential tax treatment.
Minimum payouts required Once you reach 70½ years of age, your Gold IRA is subject to a minimum required payout (RMD), as with any other IRA account. Some very common types of IRA-approved gold include American Eagle coins and bars, and Canadian Maple Leaf coins. Costs to buy and store gold Once you’ve opted for a specialized, self-managed Gold IRA, you need to remember that there are fees for all aspects of buying, storing, and selling the gold. Unless the IRA is a self-managed IRA with a custodian bank, you cannot buy physical gold within that IRA.
You can extend all or part of the balance to fund a Gold IRA without incurring any tax liability, provided you complete the rollover within 60 days.
