Gold and retirement investment accounts
Investors who have traditionally relied on savings accounts, stocks and bonds for retirement are increasingly looking for other options in response to inflation, market uncertainty and other factors. With online investing at its fingertips thanks to apps and websites, it’s easy for investors to consider adding other investments such as cryptocurrencies and, yes, even gold.
Gold and other precious metals have long been popular investments, but a Gold IRA takes things a step further by allowing investors to own bullion within a retirement account.
Precious metals held for retirement investing
Gold IRAs are a type of self-directed IRA, which means they can include certain alternative investments in addition to traditional assets. Rather than owning shares in a fund that invests in gold or other precious metals, investors own bullion that meets certain criteria, including:
- Coins and bars that meet certain purity requirements
- Some types of platinum, palladium and silver investments
- Precious metals that are purchased as part of the IRA process and held by a custodian that meets IRS requirements
Unlike other precious metals investments that can be purchased online and held at home, Gold IRAs must be reported and held through a custodian. While investors make decisions about which metals to add to their Gold IRA, the custodian takes care of IRS reporting requirements and other details. Not all collectible coins qualify for a Gold IRA, and investors should be aware of storage fees and other costs associated with this type of account.
Gold IRAs may make sense for investors who want exposure to gold and other precious metals as part of a well-diversified retirement portfolio. Rather than tech stocks, growth funds and other investments that may perform similarly to one another, gold can provide a different type of exposure for investors. That said, Gold IRAs aren’t necessarily for everyone, and investors shouldn’t add one simply because they’ve seen scary headlines about the market or the economy.
Does it belong in your retirement strategy?
Gold and other precious metals have historically been popular with investors who are worried about losing faith in currencies, institutions or markets. Gold is thought of as a store of value in times of uncertainty, though it’s important to note that gold doesn’t always go up when the stock market goes down, and isn’t guaranteed to hedge against inflation.
Gold IRAs may make sense for investors who are looking to diversify a portfolio that’s heavily concentrated in one asset class or investment style, whether that’s real estate, cash, tech stocks or cryptocurrencies. However, investors who need income from their retirement accounts or who expect to make a lot of trading activity may want to think twice about adding a Gold IRA since gold doesn’t generate income (think rent, interest or dividends) and its value can be volatile.
Opening the account takes a few extra steps
Gold IRA account setup documents
Opening a Gold IRA isn’t as simple as logging into an online brokerage account and making a few clicks to own shares in an exchange-traded fund (ETF). Investors interested in a Gold IRA will need to:
- Open a self-directed IRA with a custodian that offers Gold IRAs
- Make an eligible contribution or move money into the account through a transfer or rollover (note that indirect IRA-to-IRA rollovers must typically be completed within 60 days, and investors can generally only make one IRA-to-IRA rollover within a 12-month period; transfers from one IRA custodian to another sidestep this issue)
- Place an order for eligible coins or bars
- Have the coins or bars sent to an eligible storage facility (investors generally can’t have their Gold IRA assets sent to them)
- Keep an eye on their holdings, fees and overall allocation over time
Gold can potentially play a role in a well-diversified retirement strategy, but investors should think carefully about whether a Gold IRA makes sense for them.
The fees deserve a careful look
Gold bullion and investment fee records
There are plenty of moving parts in Gold IRAs and investors should make sure they understand all the fees before making any transactions, including:
- Set-up fees
- Annual account fees
- Storage fees
- Insurance (if applicable)
- Dealer markups (the difference between the bid and ask price on coins and bars)
These fees aren’t necessarily dealbreakers, but investors should be aware of the total cost of owning a Gold IRA and make sure it’s worth it compared to the size of the position they’re looking to take.
It’s also important to consider whether opening a Gold IRA is the best way to add gold exposure to a portfolio given your tax situation, investing time horizon, liquidity needs and risk tolerance. Gold can be accessed in traditional brokerage accounts through ETFs and other products, and that may be a better choice for some investors.
This approach isn’t right for everyone
- Tries to rush you into a decision
- Says there’s a market event that requires you to take action
- Tries to convince you that their product is the only safe choice
- Acts like normal IRA rules don’t apply
Check whether it fits your situation
If you’re considering a Gold IRA, sit down and make a list of your assets and how you’ve divided your investments among stocks, bonds, real estate, cash and alternatives while accounting for broader retirement considerations such as Senior Living. Then consider if a Gold IRA makes sense given your:
- Investing timeline
- Whether you’ll need to start taking withdrawals in the near future
- Current tax situation
- Willingness to own assets that don’t produce income
- Overall comfort level with risk
- Total percentage of assets you’re willing to devote to a Gold IRA
- Willingness to pay fees for storage and other services
Don’t skimp on the basics
A Gold IRA may be a niche diversifying strategy for retirement savings, but it can’t substitute for an adequate cash reserve or a thoughtful withdrawal strategy.
Like any investment, Gold IRAs have their pros and cons. The key feature of Gold IRAs, which is owning actual, tangible assets, is both their best and worst feature because they come with unique storage and handling requirements.
Before rolling over funds into a Gold IRA, investors should know:
- All the fees
- What products are allowed
- What storage facilities are acceptable
- How the rollover process works
FAQ
Can I keep my Gold IRA assets at home?
No, in most cases metals purchased with funds in a Gold IRA must be stored in an approved facility to maintain the tax advantages of the account.
