What Is A Gold IRA?

A Gold IRA is the name commonly used for any Individual Retirement Account (IRA) set up to allow the addition of gold / precious metals to the account.

Regular IRAs do not permit investing in physical metals – to add metals such as bullion bars or coins to an IRA requires opening a Self-Directed IRA (SDIRA)

Like any IRA, this means investors can add gold investments in a highly tax-advantaged way, either tax-free at purchase (Traditional IRA), or free of tax on distribution (Roth IRA).

To confuse the issue a little, not all Self-Directed IRA companies have processes in place to handle physical bullion and so for those that do, their SDIRAs have become known as Gold IRAs.

For bullion investors, we’ve compiled a list of US bullion companies and IRA specialists who can help. From IRA bullion dealers, to accountants and attorneys each specialize in providing gold IRAs or advising on investing in gold as part of a retirement plan.
 

Allowable Assets

You are not limited to adding gold to a gold IRA, investments can include any IRS permissible asset provided the SDIRA company can handle the paperwork and storage. If you have a specific asset in mind it pays to ask the company whether they can or cannot service your needs prior to opening the account.

However, we’re concentrating on Gold.
 

Only Gold? What About Silver?

Silver is a hugely popular precious metal for those comfortable with a little more risk within their IRAs, thanks to the potential for higher gains due to it’s more volatile trading patterns.

Silver is said to be undervalued in relation to gold and so can add an extra layer of hedging in any diversified portfolio.

In the 2008 crash Silver outperformed gold putting a 448% profit into investors pockets versus the 166% gain seen in gold . Do bear in mind that silver is both a monetary metal and an industrial metal, so can be affected negatively by downturns if the industries using silver are affected negatively. Overall however silver has a very shiny future thanks to it’s wide scope of uses in electronics and environmental technologies such as solar panels.

Platinum and Palladium can also be added to a gold IRA. Although the choice of permissible platinum and palladium bullion products is significantly lower than for gold and silver, these metals have a massive potential for upside thanks to their use in developing eco technologies such as hydrogen fuel cells. If (as we believe) battery power is not the future of transportation, but instead cleaner renewable hydrogen fuel cells become the main driving force on the roads, Platinum will reclaim it’s place as the most precious of precious metals.

Gold will always be the most popular asset of the metals, part due to it’s longstanding history as a store of value and in part due to it’s simplicity of understanding, it’s lack of substantial risk and of course it’s glamor!

Any Downsides to a Precious Metals IRA?

Tax advantages are a huge plus but what about negatives? For some gold investors a major downside to a gold IRA is the fact that you can never take possession of the metals your plan owns.

They must be held by a qualified third party who acts as a guardian on behalf of the IRS. These legal custodians follow a strict set of rules and a have a duty of care to track your metals’ value, total account values, transactions and taxation. If you were to take physical delivery of your metals it can create a taxable event and trigger penalties – in some cases seeing all investments in your IRA being deemed distributed – which could be disastrous on a tax front.

This is one reason we don’t recommend ever opting for a “home storage” IRA, as despite the assurances of the companies promoting these – it’s YOUR hide on the line if and when the IRS catches up with you.

For other investors with a more privacy-focused mindset, any investment account with clear government oversight is going to cause concern. For these investors, a secret stash of gold and silver close to hand holds far greater value than an official fully audited account held in a distant vault…

These two groups apart a gold IRA is an excellent way to buy and hold precious metals – especially for investors in higher income tax bands.