An individual retirement account (IRA) is a type of investment account that offers tax benefits to people who use it to save for retirement. A gold IRA is a self-directed IRA that allows investors to receive tax benefits while investing in physical gold and other precious metals. To invest IRA funds in gold, you must set up a self-directed IRA. This is a type of IRA that the investor manages directly and is allowed to own a wider range of investment products than other
IRAs.
For a gold IRA, you need a broker to buy the gold and a custodian to create and manage the account. This company will store or store your real precious metal, says John Johnson, president of GoldStar Trust, headquartered in Canyon, Texas. Since you can also hold silver coins or gold bars, platinum and palladium in a gold IRA, a more correct term is, technically speaking, “precious metal IRA.” Depositaries may use different terms. So make sure you understand how a company stores your gold and what you’ll get if you accept a distribution in kind when you retire
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Some IRA companies guarantee to buy back the gold from you at current wholesale prices, but you could still lose money if you close the account, which is not usually the case when opening and closing regular IRAs. Others say they don’t, but be aware that the price they’ll pay you when they buy back gold is likely lower than the price they’ve set for the gold they’re selling. Physical gold is considered an alternative investment, which is not allowed in a regular IRA. Gold IRAs are a type of self-directed IRA, which means you have complete control over your investment decisions and more freedom over the type of investments you keep in your account
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Gold IRA investors, however, do not enjoy this benefit, as gold does not pay returns, dividends, or interest. If gold seems like a good choice for you, Sentell suggests investing no more than a third of your retirement savings in a gold IRA. If this isn’t a priority for you, there are other ways to add precious metals to your portfolio besides a gold IRA. With a gold IRA, you invest in physical gold bars, coins, or gold bars, providing a level of stability and security that traditional paper investments may not offer
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By adding a gold IRA to your financial plan, you’re adding inflation protection that can help protect your retirement savings from the corrosive effects of rising prices. The rules for withdrawing from a Gold IRA are similar to other individual retirement accounts. While regular IRAs are limited to securities such as stocks and bonds, the IRS allows alternative investments in self-directed IRAs. So if your portfolio consists of both gold and paper investments, a loss on the gold side is offset by the gain in other assets
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Given that the stock market typically rises by around 7% in an average year, it would be rare for a gold IRA to outperform other retirement investments. The United States government only allows certain types of coins and gold bars to be deposited into a Gold IRA account
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