Golden is often seen as one of the best ways to counter inflation and is considered a safe investment due to its low volatility. But did you know that you can hold gold as part of an individual retirement account (IRA)?
These specialized retirement accounts are a great way to diversify your assets while offering the stability stock-based options may not offer you. And the best part is that your regular IRA can rollover to a gold IRA. Here’s everything you need to know about this form of investing.
How Does a Gold IRA Work?
Gold IRAs are an alternative type of retirement account approved by the IRS. While other types of IRA let you hold gold stocks and EFTs, a gold IRA additionally lets you hold physical gold bullion and other metals as part of your investment.
Much like their traditional counterparts, gold IRAs also offer investors tax advantages. These accounts can be created through a special gold IRA custodian, who will be responsible for managing purchases and storing your physical gold reserves.
What Metals Can Be Part of a Gold IRA?
Besides gold, you can also buy several types of metal through your Gold IRA, including silver, platinum, and palladium. However, different restrictions and rules apply to each type of metal.
- Gold – Your gold IRA gold must have at least 99.5% purity.
- Silver – The minimum purity for eligible silver coins and bars is 99.9%.
- Palladium and platinum – These metals should be at least 99.95% pure.
Investors should be aware that only certain forms of bullion, such as bars or coins, are approved. These restrictions are put in place to guarantee investors only purchase high-quality metals that hold their value. Here’s what you need to know:
- American Eagle gold coins are accepted despite being 91.6% pure.
- Other gold coins such as American Buffalo, Chinese Panda, and Credit Suisse bars are also accepted.
- Gold artifacts and collectibles are considered invalid investments.
Luckily, a custodian will be able to guide you through what can and can’t be used towards your gold IRA.
Types of Gold IRAs
Gold IRAs are available in a wide variety of types, just like you would expect from a regular retirement account. Investors should choose their type according to their financial situation.
- Traditional Gold IRA – In this type of retirement account, investments grow tax-free. However, you will have to pay income tax once you withdraw your retirement savings.
- Roth Gold IRA – Unlike the traditional variant, Roth Gold IRA taxes are paid while you contribute. Therefore, you won’t have to pay taxes when you withdraw your gold IRA savings.
- SEP Gold IRA – These IRAs are very similar to the traditional type, although only for self-employed and small business owners.
Benefits of a Gold IRA
Here are the main reasons why financial advisors consider investing in gold IRAs a wise decision:
- Diversifies your portfolio – A gold IRA is an excellent way to diversify your investments.
- Counters inflation – Gold allows you to keep your purchasing power while inflation increases.
- Better returns – Gold has seen a 5x price rise over the last 20 years, making it a great investment.
Changing Your IRA to a Gold IRA
One of the best parts of gold IRAs is migrating your existing IRA to a gold one. First, you’ll have to set up a self-directed IRA through a specialized company. Then, all you have to do is contact your existing IRA administrator to create a new transfer.
After receiving the funds, you can choose which types of gold you’d like your IRA custodian to purchase.