How to Invest in Gold with an IRA

Investing in gold with an IRA is a great way to diversify your retirement portfolio and hedge against inflation. To do so, you need to create a self-directed IRA, a type of IRA that the investor manages directly and that can own a wider range of investment products than other IRAs. When selecting a gold IRA company, research is key. Learn more about what to look for in Money's guide to the best gold IRA companies.

You can fund your new account using some or all of the funds in an existing retirement account. IRS rules allow funding a gold IRA with money extracted from another IRA, 401 (k), 403 (b), 457 (b) or Thrift Savings Plan. To use an IRA to invest in gold, you'll need to follow two IRS guidelines. First, you can only invest in IRS-approved gold.

While the list of approved options changes, the IRS says they should be “highly refined ingots.” To own gold, whether in coins or ingots, in an IRA you need a true self-directed IRA offered by a few custodians. You need a custodian because IRS regulations require that coins or ingots be in the possession of the custodian. The ETF can also buy, store and secure gold at a much lower price than you or an IRA custodian. Gold IRA companies vary in experience, service and costs, so be sure to compare your options before continuing to open an account. After doing this research, you'll probably come to the conclusion that gold, ingots, and coins shouldn't belong to your IRA. In practical terms, this means that the account minimums at many gold IRA companies would require you to invest much more than the 5% or less that financial advisors generally recommend allocating to precious metals, which could expose your savings to excessive risk. Unfortunately, most gold IRA companies don't have a good record of transparent fees on their websites, so finding out the details may involve a phone call or two.

The IRS has issued resolutions in private letters to major gold ETFs stating that IRAs may own ETFs. To avoid the possibility of not meeting the reinvestment limit, many people choose to let their gold IRA company coordinate the reinvestment through a direct transfer from one institution to another. Many gold IRA companies have preferred custodians that they recommend or require customers to use, or they can search for a custodian through the RITA website. A gold IRA can provide you with the tax benefits of a conventional retirement account, but you must follow IRS regulations or risk penalties and penalties. A Roth IRA also offers flexibility in what type of investments you can hold, but not all assets can be easily accessed through IRAs. Annual fees usually come from the custodian of the account, and storage and insurance fees are owed more to the depositary than to the gold IRA company. It's important to make sure you understand all the costs and expenses before buying physical gold to keep in an IRA. Even with an extended time horizon, gold investors have no guarantee of making money from their investment, especially if you plan to rely on a gold IRA company's repurchase program to sell your gold when you have to receive distributions from that IRA.

Buyback programs generally pay you the wholesale price of gold, which can be 30% lower than the retail price. This means that the price of gold would have to appreciate by at least 30% from the moment you bought it, plus the cost of the fees you pay to maintain the account, before you can start making profits.

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