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Originally Published: Mar 28, 2024
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Originally Published: Mar 28, 2024 Last Updated: May 22, 2024 15 min read

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Buying gold in an individual retirement account (IRA) is touted as a way for savers to diversify their investments, but this type of IRA is a controversial investment vehicle that should only be considered by seasoned investors with knowledge of investing in precious metals.

In the last 20 years, gold has rewarded long-term investors with strong returns. The metal is often included in investment portfolios because it’s considered a hedge against inflation and can rise in value during periods of economic uncertainty and stock market volatility.

A gold IRA, which can also hold silver, platinum and palladium, is one way to invest in precious metals while maintaining the tax benefits of a conventional IRA. However, if you choose to invest in gold this way, be mindful that these types of self-directed individual retirement accounts — which can hold assets not permitted in traditional IRAs, like real estate, cryptocurrency and precious metals — often carry high fees.

Purchasing physical gold to hold in a retirement account has drawbacks compared to investing in equities like stocks, bonds or mutual funds, so it’s important to understand all of the associated costs before investing in a gold IRA.

A key selling point of these investing products is that you own the physical gold itself. If this doesn’t matter to you, there are other ways to add exposure to precious metals to a retirement portfolio, such as buying stock in gold mining companies or shares of the best gold ETFs.

Even with a long time horizon, gold investors have no guarantee of making money on their investments in gold IRAs — especially if you plan to rely on a gold IRA company’s buyback program to sell your gold if and when you take distributions (self-directed IRAs can be either traditional or Roth, with traditional accounts carrying required minimum distributions, or RMDs, after age 72).

Going back to 1971, the average annual return for gold is 7.98%, but investors in gold IRAs don’t always realize those gains. When you withdraw from a gold IRA, buyback programs sometimes only pay you the wholesale price of gold, which can be as much as 30% lower than the retail price. This is referred to as “the spread,” and given the costs of buying and selling gold in an IRA, it can take a long time to turn a profit. However, investors can pay lower fees by choosing a reputable company for their investment.

Here’s what you need to know about investing in a gold IRA:

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3 steps to investing in a gold IRA

In order to own IRS-approved physical precious metals in a retirement account, you’ll need a self-directed IRA, or SDIRA. The following three steps outline the process.

1. Open a self-directed gold IRA

Many major companies offering retirement accounts do not have an option for investing in physical gold through an SDIRA. There are some exceptions, like Fidelity, which has gold IRA investing, but usually gold IRA investors need to open accounts with a company focused on providing this financial product.

By opening this type of self-directed individual retirement account with a custodian that handles physical precious metals — which a reputable online gold dealer would refer you to — you’ll be able to invest in gold and other precious metal bullion products in the form of bars, ingots, coins and rounds. It is crucial to do your research when choosing which company to use. (You can read about what to look for when selecting a gold IRA company in our guide to the best gold IRA companies.)

To avoid running afoul of tax regulations, gold IRAs need to have an IRS-approved custodian and IRS-approved depository:

  • The custodian is a financial firm tasked with executing investment activities and administrative duties that are necessary to keep your account in good standing with the IRS, which is crucial to keep its tax-deferred status.
  • The depository is the secure third-party storage facility for your precious metal products. Storage is provided in either pooled or segregated safekeeping, and the depository must also be in good standing with the IRS in order to maintain tax-deferred status.

Many gold IRA companies have preferred custodians and depositories they either recommend or require customers to use. Alternatively, you can search for a custodian through the Retirement Industry Trust Association website.

2. Fund your gold IRA

There are numerous ways you can fund your gold IRA. You can elect to use one or more of the following:

Rollover

Many people fund their new account using money held in an existing retirement account. IRS rules permit funding a gold IRA with money drawn from another IRA, 401(k), 403(b), 457(b) or Thrift Savings Plan. To initiate the process, contact the administrator of your current retirement plan and tell them how much you want to roll over.

If you are younger than 59.5 years old and using a rollover to fund a gold IRA, you have a maximum of 60 days to get the withdrawn funds into the new account. Even being a day late will trigger a 10% early withdrawal penalty, and you will have to pay income tax on the withdrawn funds.

Transfer

To avoid the prospect of missing the rollover cutoff, many people choose to let their gold IRA company coordinate the rollover via a direct institution-to-institution transfer. Since the money never technically passes through your hands, you don’t have to worry about taxes or penalties being assessed.

Cash contribution

You normally don’t want to fund a gold IRA with cash because you will have already paid taxes on that money, and the point of using an IRA as your investment vehicle is to capture the tax advantage that comes with using pre-tax dollars. The exception here is the gold Roth IRA option, which investors fund with after-tax dollars.

3. Decide how much to invest

One important consideration for both IRA rollovers and transfers is to determine how much you want to funnel into your new account.

Keep in mind that most conventional IRAs give you the ability to build a diversified retirement portfolio. An IRA holding nothing but precious metals is, by definition, not diversified, because precious metals comprise a single asset class.

The conventional wisdom is that you should limit your investment of precious metals to about 5% to 10% — depending on overall economic conditions — of your overall portfolio to achieve appropriate diversification. That said, you’ll have to meet the minimum investment requirement for your gold IRA, which could be as low as $1,000 or as high as $50,000.

The custodian charges a fixed annual fee (e.g., $225 for account maintenance and storage) whether you invest $1,000 for $1 million. Therefore, the lower amount you invest, the higher the percentage of your investment that fee accounts for. It is suggested to consider investing at least $25,000 or more.

If you have a relatively small investment portfolio, high account minimums could require you to invest more than what financial advisors generally recommend you put in gold, which could expose your nest egg to too much risk.

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How much are gold IRA fees?

Having ownership of physical precious metals is the key selling point with these accounts, but storing and insuring precious metals isn’t cheap and it comes with a marginal cost that increases over time as your investment increases.

Unfortunately, most gold IRA companies don’t have a great record for fee transparency on their websites, so finding out the details might entail a phone call or two. Common fees include account setup and maintenance, storage and insurance. You will also be charged a markup — which varies based on the company and the type of item — when you buy your precious metals. There can also be shipping fees if you choose to have gold sent to your home when you withdraw from the account.

Beware of companies that claim they don’t charge fees for account maintenance or storage and insurance. While this might technically be true, that doesn’t mean you won’t pay them in some way. Annual fees usually come from the account custodian, and storage and insurance fees are more often owed to the depository rather than the gold IRA company.

Also, beware of companies that provide claims of offering free metals. Oftentimes, these gold dealers bake in an additional spread to cover the assumed costs so-called “free metals.”

In general, gold IRAs tend to have higher fees than traditional IRAs. If you just want to purchase gold or silver, here's what you need to know about how to buy gold outside of an IRA. Or, if you have a conventional retirement savings account and want to add exposure to gold, read here about how to buy a gold ETF — an exchange-traded fund that tracks the performance of gold or gold mining companies.

Rules, regulations and restrictions to buying gold in an IRA

When it comes to gold IRAs, knowing the basic rules and regulations about what the IRS does — and doesn’t — permit can save you from making a potentially expensive mistake with your retirement nest egg.

Must invest in IRA-approved metals

You can hold coins or bullion in a precious metals IRA. Despite the colloquial term “gold IRA,” you can also hold silver, platinum and palladium in this account.

If you’re wondering what “IRA-approved” gold is, be aware that there are minimum requirements for metal fineness, purity and specifications about the type, size and weight. Regarding IRS-approved purity:

  • Gold must be 99.5% pure.
  • Silver must be 99.9% pure.
  • Platinum and palladium each must be 99.95% pure.

According to STRATA Trust Company, one of the major gold IRA custodians, in order to be held in a gold IRA, precious metals must be certified or accredited by a national government mint or one of the following precious metals authorities: NYMEX, COMEX, NYSE/Liffe, LME, LBMA, LPPM, TOCOM or ISO 9000.

Two of the most commonly used types of IRA-approved gold are American Eagle proof coins and bullion, and Canadian Maple Leaf coins.

Age and retirement limitations

Self-directed individual retirement accounts, including gold IRAs, have the same contribution limits and age-based distribution limits as conventional IRAs. You can contribute up to $7,000 in 2024 if you are less than 50 years old, or up to $8,000 if you are 50 or older.

Taxes

If you withdraw gold from your IRA before you reach the age of 59.5, you will be assessed income tax on the value of that gold as well as a 10% penalty for taking an early withdrawal from a retirement account.

Gold IRA withdrawal

If you opt for a traditional gold IRA, like a traditional IRA, you will have to begin taking RMDs at the age of 72. To avoid this, you can find a gold IRA company that offers a Roth self-directed individual retirement account, which has the same tax treatment as a conventional Roth IRA, wherein investors use after-tax dollars for purchases, aren’t required to take RMDs and aren’t taxed on gains or qualified distributions.

If you're looking to access the value of the holdings in a traditional gold IRA, you will be required to take distributions from your gold IRA in one of two ways:

  1. An “in-kind” distribution means you have your gold shipped to you. Note that you will have to pay for shipping and insurance. A key distinction of an “in-kind” distribution is that you are not forced to sell or exit the position and in doing so, you can decide what to do with it and how and when to sell it.
  2. The other option is liquidating your gold and having the gold IRA company send you the funds. While most IRA companies will buy back gold and other precious metals, be aware that the price at which they purchase gold is lower than the price at which they sell gold due to the aforementioned spread.
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Gold in an IRA FAQs

What is a gold IRA account?

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A gold IRA is a type of self-directed individual retirement account. Along with gold, many people also hold silver, platinum and palladium in gold IRAs. Self-directed accounts often have higher fees than other types of retirement savings accounts. because of the additional layers of oversight and administrative work necessary. These fees can erode your returns, so have a good understanding of how much it will cost before opening a precious metals IRA.

How to own gold in an IRA?

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Gold IRA companies, which are essentially precious metals dealers, will facilitate the creation of a self-directed IRA in which you can legally hold gold and other precious metals. Gold IRA companies can steer you toward IRS-approved account custodians and depositories where your gold will be physically stored. Your gold must be stored in one of these depositories — not at your home or in a safe deposit box.

If you don't want to hold physical metals, there are other ways to get gold in your investment portfolio, including gold ETFs or the stocks of gold mining companies.

What is IRA-eligible gold?

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Since most gold coins are minted specifically to be collectibles, there are very precise regulatory requirements that define which precious metal items are suitable for investing. You can see more of the IRS's detailed requirements on size, weight and metal purity that govern which kinds of coins and bullion can be held in a gold IRA. The aim of these precise requirements is to ensure that people are keeping investment-grade assets in their accounts, rather than collectibles.

Bottom line to gold in an IRA

A gold IRA is an alternative investment option for retirement savers who want to own gold as a hedge against inflation or to diversify their assets beyond the stock market. You may want to learn how to buy gold in an IRA if you want to own physical gold rather than shares of equities — e.g., stocks, mutual funds or ETFs leveraged to gold. However, gold IRA investing can involve high fees and other risks, so it’s not recommended for most people.

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