There are two ways to invest in gold using an IRA. One option is to set up a self-directed gold IRA, which allows you to buy physical gold and silver with retirement funds. A gold IRA can give you the tax benefits of a traditional retirement account, but you must comply with IRS regulations or risk fines and penalties. Buying physical gold for a retirement account can also be more expensive than investing in assets such as stocks, bonds, or mutual funds.
It’s important to be aware of all costs and expenses before you buy physical gold to keep in an IRA. To invest in gold with an IRA, you must follow two IRS guidelines. First, you can only invest in IRS-approved gold. While the list of approved options is changing, the IRS says it must be “highly refined precious metal.”
Gold bars and round gold and silver coins are also allowed in an IRA if they have a fineness of 99.9%. People who believe that physically owning gold or other precious metals is safer can achieve that peace of mind with a gold or silver IRA. Most Roth IRAs do not allow you to buy gold directly, but you can invest in gold indirectly to benefit from gold price trends or wider industry trends. They sell gold coins, gold bars, and the like, but they don’t offer IRA investment advice (regardless of what their websites or other marketing materials might suggest).
IRS rules allow funding a Gold IRA with funds from another IRA, 401 (k), 403 (b), 457 (b), or Thrift Savings Plan. In practical terms, this means that the minimum account accounts with many gold IRA companies would require to invest much more than the 5% or less that financial advisors generally recommend investing in precious metals, which could put your nest egg at too high risk. Unlike gold ETFs or gold company stocks, a precious metal IRA allows you to hold the physical precious metals in accordance with IRS regulations. Gold IRA companies vary in terms of experience, service, and costs. So take a look around and compare your options before you proceed with opening an account.
To avoid the prospect of missing out on the rollover cutoff, many people choose to have their Gold IRA company coordinate the rollover through a direct transfer from institution to institution. You don’t want to fund a gold IRA with cash because you’ve already paid taxes on that money, and the point of using an IRA as an investment tool is to take advantage of the tax advantage that comes with using pre-tax dollars. The ETF is also able to buy, store, and insure gold at a much lower price than you or an IRA custodian bank. The IRS has issued private letter rules to major gold ETFs, which state that IRAs may own the ETFs.
To avoid running afoul of tax rules for proprietary transactions, self-governing IRAs, including gold IRAs, must have an IRS-approved custodian bank. Most IRA companies may buy back gold, but be aware that the price at which they buy gold is lower than the price at which they sell gold.
