“Gold IRAs can be either traditional or Roth options,” says Daniel Sentell, former communications director for Broad Financial, the Monsey, New York-based financial company that offers such accounts. Whatever the version, a gold IRA can be invested only in real gold, be it coins or bars.
According to Brett Gottlieb, financial advisor and founder of Comprehensive Advisor in Karlovy Vary, Calif., the first thing to consider is whether you want to have a physical investment in your portfolio rather than a gold mining company, mutual fund, or exchange. a traded fund that tracks the gold index.
If you do choose real metal, certain criteria apply for holding it in the IRA. “Precious metal coins or bars must meet IRS purity standards and belong to an IRA trustee, not an IRA owner,” Moy says. “Gold must be stored in an IRS-approved vault.”
In other words, you can’t hide bars or coins in safe deposit boxes, home safes, or cabinets. “All other rules regarding IRA contributions, payments, and taxes apply,” Moy adds.
Gold in a gold IRA must be stored in an IRS-approved vault; you cannot store it in a safe, home safe, or under a mattress.
Finding a Broker or Custodian
To invest in gold IRAs, you must create a stand-alone IRA, a kind 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 will need a broker to purchase gold and a custodian to create and administer an account. “This company will hold or store your real bars,” says John Johnson, president of the Canyon, Texas-headquartered GoldStar Trust.
Custodians are typically banks, trust companies, credit unions, brokerage firms, or savings and loan associations that have been approved by federal and/or state agencies to provide asset custody services to individual investors and financial advisors.
They do not select metal dealers for their IRA clients. This is the responsibility of the investor. However, well-known custodians have relationships with several hundred dealers across the country and may be willing to share this list.
It can also work and vice versa. “Some metal dealers may recommend an IRA custodian,” says Johnson. “However, consumers can always look for custodians on their own.”
Selecting a company is tricky, according to Moy, as it’s a specialized task that large brokerage firms don’t usually offer. “When I was doing my homework, there were a few criteria that were important to me,” he says. This includes:
• Transparency: By knowing all your expenses in advance, you will be able to avoid unpleasant surprises such as hidden fees after investing.
• Track record: Look for a company with an outstanding reputation with unbiased third parties such as the Better Business Bureau or the Business Consumer Alliance. Moy says it would be helpful to know what customers have to say about the company, especially the number of complaints filed. He looked for firms that were “educational and didn’t push for hard selling.”
• Flexibility: Each investor’s needs and goals are different, so Moi suggests choosing a company that suits you, rather than taking a one-size-fits-all approach.
• Qualifications: You should only deal with a company that has all the relevant and required licenses, registrations, insurances, and bonds to protect your investment. Request confirmation of these licenses and other information.
Special expenses
Owning gold in a gold IRA does come with some special costs. The costs an investor will face include:
• Sellers Commission (Markup): “While gold has a constant rate, there are markups depending on whether you want gold bars, coins, proofs, etc.,” says Sentell. The markup, which may also vary by supplier, is a one-time fee. “Similarly, each form of gold has its own set of requirements for when an investor must sell,” he adds.
• Retirement Account Setup: This one-time fee is for creating your new IRA account. It also varies by institution, but it can be more than the usual setup fee as not all financial services firms deal with gold IRAs.
• Custodian fees: Again, while you will run into these annual costs (as well as any associated assets or transaction fees) with all IRAs, they can be higher for this type of account, especially if you need to switch to a different financial institution than the one that has your other accounts.
• Storage Fee: Gold must be stored in a qualified vault for which a storage fee is charged.
• Cash Out Costs: If you want to close a gold IRA by selling your gold to a third-party dealer, said dealer will want to pay less than what they pay on the open market. Therefore, if prices have not risen significantly since you bought them, you may be losing some of your capital.
Some IRA companies guarantee to buy gold from you at current wholesale prices, but you can still lose money by closing your account, which is not usually the case with regular IRA openings and closings.
