Should You Get a Gold IRA? A Complete Guide

Oct 03, 2023 By Susan Kelly

When you put money into a gold retirement account, what do you get? You are buying gold with some of your retirement savings. On one side of this argument, many investors say that gold is a bad investment because it doesn't pay interest or dividends, and it costs money to store and protect. So, is adding a gold IRA to your portfolio a good idea? Not all IRAs let you invest in gold, but this article should help you figure out what to look for in your IRA to see if it enables you to build a golden nest egg for your retirement. So should you get a gold IRA or not.

How Does A Gold IRA Work?

The tax code lets vehicles that are "self-directed" hold precious metals like gold or silver. Most IRAs put their money into stocks, bonds, and cash-like investments. But this doesn't mean you can put any precious metal into an IRA. The tax code says which platinum, silver, and gold coins can be held in these special accounts and how pure the silver, platinum, gold, or palladium bars must be. Other valuable metals, like jewelers and collectible coins, are not allowed.

To set up an IRA (Individual Retirement Account) correctly, you need to find a custodian who will let you hold valuable metals like gold in your IRA. You will also need to find an approved place to store the money. The next step is to buy the approved gold or other precious metals, like silver, platinum, or palladium, and then send them to the depository in a way that lets the custodian keep track of them. Some cases of acknowledged forms are the American Silver Eagle and gold and Canadian Maple Leaf coins, PAMP Suisse Gold bars, most platinum bars, and the Austrian Philharmonic coin.

Putting Money in A Traditional IRA or A Roth IRA

Traditional and Roth IRAs can hold gold because of the same tax rules. Simplified Employee Pension (SEP) accounts and SIMPLE-IRAs can also hold gold and silver. The same steps are used to choose between a Roth IRA and a traditional IRA. There are cons and pros to each type of account. You can save on taxes by putting money into a conventional IRA, and the money grows without being taxed. On the other hand, money taken out of a Roth IRA is not taxed, and money that has already been taxed is used to make contributions.

Is It Safe to Put Gold in An IRA?

When you retire, you need an investment that pays you money right away or is likely to go up in value over time, so you can sell it and use the money to buy things. You are wasting tax-deferred space on something that doesn't make money and doesn't save you taxes because of that. When the money is taken out, it will be taxed, just like any other traditional IRA. Unlike mutual funds, stocks, ETFs, etc., physical gold doesn't pay dividends, capital gains distributions, or interest, all tax-sheltered in an IRA.

Minimum Rules For Distribution

It would be best to take RMDs (required minimum distributions) from your traditional IRA every year after turning 72. Roth IRAs are not subject to RMDs. It would be best to have enough cash to take your required distributions from a traditional IRA. This can be hard with Gold IRAs, and you might have to sell your investments to meet RMD rules. The good news is that all of the minima required distribution can come from other IRA accounts. When deciding whether a Gold IRA should be traditional or Roth, RMD rules should be considered.

Should You Invest Your IRA in Gold?

Putting money into a Gold IRA is the same as putting money into other asset classes. You should ensure that your investment portfolio fits how much risk you are willing to take and how long you are ready to wait. It would be best to make sure that investing in gold or other alternative asset classes fits your overall financial plan. Remember that adding gold to your retirement plan gives you some diversification and may make you feel better about economic uncertainty. Still, gold should only be a small part of your overall retirement nest egg.

Advertisements for Gold IRAs play on our fears and may seem to have a strong case at first glance. Don't be in a hurry to set up a Gold IRA. Most of the time, putting a lot of your IRA money into gold or other precious metals is a long-term mistake because they are expensive, unpredictable, and have a mixed track record as investments.

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