When saving for retirement during uncertain market conditions, a gold individual retirement account (IRA) provides an alternative to stocks, mutual funds and bonds. Gold has long been seen as a safe haven for wealth during times of economic turmoil. A gold IRA seeks to take advantage of this investment opportunity within a tax-advantaged retirement savings account.
Almost anyone with earned income in the United States can open an IRA account, and it’s easy to set up one for investing in gold. Follow these five steps, and you could soon start investing in a gold IRA.
(No investment, including gold, is guaranteed to retain or increase in value. All investing involves risk.)
What is a Gold IRA?
A gold IRA is a self-directed individual retirement account (IRA) that allows you to invest in physical gold. These three features break down as follows:
- IRA: An IRA is a government-sanctioned retirement savings account, which means it provides tax breaks when your savings are used during retirement (generally age 59½).
- Traditional IRAs allow you to invest untaxed income, which gives you a larger initial sum to invest. Income is taxed when you withdraw it during retirement. Roth IRAs require investing taxed income, but withdrawals taken during retirement are untaxed. Any growth within a Roth IRA is normally untaxed earnings that you can keep.
- Self-Directed: Self-directed simply means that you can choose where to invest your retirement savings. There are some basic requirements, but you can choose from stocks, bonds, mutual funds, annuities, exchange-traded funds (ETFs), and real estate in some cases. Precious metals — including gold — are an option too.
- This is different from employer-sponsored retirement plans like 401(k) or 403(b). These plans can restrict you to whatever options your employer or the plan administrator offers.
- Gold: Just because gold is an investment option doesn’t necessarily mean that every IRA is set up for precious metal investing. Owning physical gold isn’t something that every IRA plan custodian (think administrator) is set up to do. A gold IRA has the systems and processes in place to hold gold bullion and coins within the account.
How to Invest in a Gold IRA: Step-by-Step Process
Even if you know little about retirement savings accounts and physical precious metals investing, setting up a gold IRA is a simple process. Here’s a step-by-step guide.
1. Research and Choose a Custodian
The Internal Revenue Service (IRS) doesn’t let individuals hold their IRA investments themselves. Instead, a custodian secures and holds the investments within an IRA. This is true for gold and all other investments held within IRAs.
“Custodian” just refers to the financial institution that’s responsible for securing and holding your IRA investments. When investing in precious metals, it’s important you choose a custodian that’s set up for holding gold and other metals. Physical gold requires storage and security measures that stocks and other investments don’t. Not all custodians are able to store physical gold safely.
When choosing a custodian for your gold IRA, there are a few other factors that you’ll want to consider:
- Fees: Almost all IRA custodians charge an initial setup fee and ongoing maintenance fees. You’ll also have storage fees if investing in physical precious metals, which cover the overhead of safely storing your gold.
- Ask for a full disclosure of all fees that will be charged, both initially and ongoing. Compare what different custodians will charge.
- Reputation: All IRA custodians are registered with the IRS, and responsible for ensuring your account complies with the applicable regulations. You generally don’t need to worry about making sure your custodian complies — they’re required to.
- You will find different levels of customer service, though. Check customer reviews and a custodian’s track record, so you can be confident in the service you’ll receive. You might even try contacting the custodian to see how quickly a question gets answered.
- Services: Confirm that a custodian provides the precious metal purchasing and storing services you’ll need. You might also inquire about other services, like retirement planning with a financial advisor, or investing in other asset types alongside gold.
2. Open Your Gold IRA Account
Once you’ve chosen a custodian, you’ll need to complete the account opening process. This typically involves providing personal information, signing agreements, and funding your account.
Be prepared to provide the following when you go to set up your account:
- Government ID
- Social Security Number
- Beneficiary information
- Method of funding account (see next step)
Beneficiaries are the individual(s) or organizations (e.g. nonprofit) who will receive your IRA should you pass. You’ll be asked to provide information for at least one beneficiary, and you can have multiple. If you have multiple beneficiaries, you’ll choose what percentage of the account each receives.
If you and your spouse are both setting up gold IRAs, you’ll each have to set up your own. These are individual accounts.
3. Fund Your Gold IRA
There are three main ways to fund a new gold IRA: direct contribution, rollover, or transfer.
Direct Contribution to Your Gold IRA
A direct contribution is when you directly fund your account, such as from a bank account. You can make a one-time direct contribution, and/or set up regular contributions going forward. Most people make any initial direct contribution from one account, but there’s no reason you could send funds from two or more bank accounts.
Contributions are subject to annual limits, both when you set up your IRA and every year thereafter. The 2024 limit for traditional and Roth IRAs is $7,000, plus another $1,000 “catch up” if you’re 50 or older.
Your custodian will need the account details for any account that you’re making a direct contribution from. They may need employer details if you set up direct deposit from your paychecks.
Transfer From Another IRA
If you have an existing IRA, the funds can be transferred directly into your new gold IRA. Any transfer from another IRA won’t incur taxes, so long as you don’t take possession of the funds. The transfer is made straight from your current IRA custodian to your new gold IRA custodian.
Your gold IRA custodian will guide you through a transfer process. You usually complete papers with the new custodian, which include account information, authorizations, and some other details. The new custodian then handles transferring your funds from the old custodian. You may still want to give your old custodian a heads-up.
It’s important to ensure that any transfer is executed properly, in order to ensure your funds aren’t taxed during the process. Your gold IRA custodian will know how to do this, though, and take care of the process.
Rollover From a Different Account
If you have another type of tax-advantaged retirement account, you may roll over the funds into an IRA. This is the process for moving funds from a 401(k) or 403(b), into an IRA.
You normally won’t have to pay taxes on a rollover into a traditional IRA, assuming the rollover is done directly from one custodian to the other. You likely will need to pay income tax if rolling over into a Roth IRA, but it might be advantageous to use the Roth account type despite being taxed during the rollover. A financial advisor can help you choose between a traditional IRA and Roth IRA.
Transfer vs. Rollover: A transfer is when funds are moved from one financial institution to another, but the account type (e.g. IRA) remains the same. A rollover is when funds are moved from one account type (e.g. 401(k)) to another (e.g.) IRA.
4. Select Your Gold Investments
With funds in your gold IRA account, you’re ready to select which gold investments you’ll actually use.
The IRS has strict rules that must be followed when investing in a gold IRA. The gold must be at least 99.5% pure, and it needs to be held in an IRS-approved depository.
There are several types of gold bullion that meet the purity requirement. Some of the most common bullion holdings in IRAs are:
- Gold bars at least 99.5% pure
- American Gold Eagles
- Canadian Gold Maple Leafs
- Other coins at least 99.5% pure
Should you include other precious metals in your IRA, purity requirements vary slightly:
- Silver must be 99.9% pure
- Platinum must be 99.95% pure
- Palladium must be 99.95% pure
You’ll likely hold a combination of bars and coins, depending on how much gold you actually invest in at a given time.
5. Manage Your Gold IRA
You’ll want to continue managing your gold IRA. It’s important to be aware of your account’s performance, for your own planning and to make allocation adjustments if necessary.
Talk with your custodian to determine how often your account will be reviewed, how often you’ll be updated, and how actively you should manage the account. Also, confirm that they’ll attend to all compliance matters.
Benefits and Risks of Investing in Gold IRAs
As with any retirement savings account, gold IRAs come with both benefits and risks.
Benefits of Having a Gold IRA
- Diversification: Adding gold to your retirement portfolio can help diversify your investments and reduce exposure to market volatility.
- Inflation Protection: Gold is often seen as a good store of wealth when inflation is high, potentially mitigating cash’s loss of value.
- Appreciation: While the price of gold can fluctuate, it has shown the potential for growth over the long term. (Returns aren’t guaranteed.)
- Tax Benefits: A gold IRA brings the tax benefits of an IRA, whether those are benefits up front with a traditional IRA, or during retirement with a Roth IRA.
Risks of Having a Gold IRA
- Market Volatility: Like all investments, gold prices can be volatile. Short-term fluctuations can decrease value temporarily, and long-term returns aren’t guaranteed.
- Fees: Gold IRAs come with additional storage fees, which might be more than the management fees associated with stocks, mutual funds or bonds.
Choosing the Right Gold IRA Provider
When comparing gold IRA providers, consider factors like fees (one time and ongoing), customer service, and how experienced a custodian is with handling gold bullion IRAs. Feed disclosures and industry reviews will help you find the right gold IRA provider — one that has reasonable fees, excellent service, and experience.
Frequently Asked Questions (FAQs)
Why Should I Consider Investing in a Gold IRA?
A Gold IRA can offer diversification, serve as an inflation hedge, and provide potential long-term value appreciation. It’s a different asset than stocks and bonds.
What Types of Gold Can Be Held in a Gold IRA?
IRS rules require that any gold held within an IRA be at least 99.5% pure. Most gold bars and coins meeting this purity standard can be held in a gold IRA.
What Are the Costs Associated with a Gold IRA?
Gold IRAs typically have setup fees, annual maintenance fees, and storage costs, which can vary depending on the custodian and provider.
How Do I Fund My Gold IRA?
You can fund your Gold IRA through direct contributions, rollovers from other retirement accounts, or transfers from another IRA.
Can I Buy Gold Directly for My IRA?
No, all gold purchases for your IRA must be made through a custodian to ensure compliance with IRS regulations.
Learn More About Gold IRAs
The IRA is one of the most common retirement savings accounts available to people in the U.S. It offers excellent tax benefits for long-term retirement savings, and a gold IRA allows you to put those savings in precious metals. If you’re interested in this type of investing for retirement, download our Precious Metals Kit to get started.
