What is a Gold IRA? | Gold IRA Guide
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Gold IRA GuideWhat is a Gold IRA?

What is a Gold IRA?

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A Gold IRA (also known as a Gold-Backed IRA, Physical Gold IRA or Gold Bullion IRA) is a type of retirement investment account that has come into the limelight in recent years. These special forms of IRA retirement vehicles are actually self directed IRAs that are meant to hold physical gold coins and bars of high purity (and other precious metals).

Thanks to new IRS rules and regulations, you are now able to own high-purity and investment-grade gold bullion and the other precious metals in their tangible form in such accounts. This provides you with a great opportunity to physically invest in gold, silver, platinum, and palladium in a way that is safe, convenient, and tax-efficient so that you can hedge your retirement assets against the uncertain economic and geopolitical landscape we live in. This type of gold IRA can be just what the doctor ordered to give you and your family all of the security you need for the uncertain future.

Benefits of a Gold IRA

Thankfully any individual is now able to safely and easily invest in gold today because of these self directed IRA accounts. Investing in precious metals is no longer restricted to only the rich and famous, due in large part to these accounts. The caveat is that it requires the special type of IRA vehicle in order to hold physical gold and the precious metals. There are several strong advantages to having such a retirement portfolio and account.

Inflation Protection

Probably the greatest single reason to inventory gold within your self directed IRA is because the precious metals are the smartest and easiest means of protecting your retirement and other assets against the ravages of inflation and other manifestations of economic chaos. As money gets inflated away by the meddling government, it decreases in value. This even reaches the ultimate value of your other traditional forms of investments.

The investments which historically do not decrease in intrinsic value nor suffer at the hands of inflation whatsoever are gold and the other precious metals. This asset class increases in value as the economy suffers and the American dollar declines over time. This is why you should consider adding gold to your retirement plans in order to hedge their value against deterioration. Because the long term trend of gold is up, it makes great sense to factor it into your retirement assets.

Efficient Tax Treatment

The tax treatment of money invested in gold within a Gold IRA should not be underestimated. There are no unfortunate tax consequences or hard requirements of declaring precious metals from the IRA to the IRS (since they are already aware of it). You also will not suffer any tax problems or penalties should you later decide to transfer your Gold IRA assets to another approved investment or retirement plan down the road.

Alternative Investment Asset Class Diversification

Stocks, bonds, and the various mutual funds are the traditional forms of asset classes. This is why most financial advisors feel so comfortable in recommending them to you, even when they are unfortunately recommending an overexposure to them in the form of typically 60 percent for stocks and 40 percent for bonds. Gold and the precious metals are one of the chief classes of alternative investments. As with real estate, art, diamonds, and other collectibles, this precious metals bullion provides a true diversification factor in your IRA vehicle that no clever magical combination of stocks and bonds can ever hope to achieve on their own. Because the beta, or correlation, between stocks and bonds compared to gold and the precious metals is extremely low, you can rest assured that falling stocks and bonds prices generally translate to rising precious metals bullion prices.

No Extra Money Required to Invest in Gold With an IRA

If you already have an established traditional IRA which is invested in stocks, bonds, cash instruments, or some combination of all of the above, then you already have the money handy to invest in gold, silver, platinum, and palladium. This is because you are able to simply roll over, or transfer, part or all of any existing retirement account over to a Precious Metals IRA. This means that you can take funds out of 401Ks, IRAs, Roth IRAs, and other forms of government retirement accounts, transfer them over to a self-directed IRA, then give orders to your IRA account administrator to purchase precious metals on your behalf, and all without having to front extra cash.

Gold IRA Investment Types

Some investors are concerned that if they transfer their traditional retirement accounts on over to a precious metals Gold IRA then they will not be able to hold other forms of non-bullion investments within the vehicle. These accounts can hold gold, silver, platinum, and palladium from the precious metals complex. It is important to know that these self directed IRA accounts are not only restricted to precious metals bullion. They can also hold franchises, businesses, stocks, bonds, mutual funds, commodities and futures, mortgages, cash instruments, and other non-collectable forms of investments. In fact, there is no other form of IRA investment or retirement vehicle which can hold a larger variety of investments than can the self directed gold IRA account.

IRA Approved Gold Bullion

Because of the 1997 Tax Payer Relief Act, you are allowed by the Federal Government and the Internal Revenue Service to inventory a decent range of different bullion coin products within the gold or precious metals IRA account. Bullion must meet certain exacting standards and specific pieces must be approved by the IRS in order to effectively be included. With gold bullion, the standard is a minimum purity of 99.5%, while with silver it is 99.9% minimum purity. The bullion must also be inventoried in an approved, third party, off-site location from your IRA custodian. Below is a listing of the various kinds of bullion coins from the precious metals complex which are allowed to be included in these types of IRAs:

gold and other precious metals you can include

Learn more in our IRA Approved Gold page.

Gold IRA Fees

The fees associated with these precious metals IRA accounts are not exorbitant if you pick one of the reputable IRA administrator firms. Such fees as are charged are levied against initial account setup, yearly maintenance of the account, and storage and insurance expenses for the precious metals. It is generally smarter to select an administrator which exacts clearly spelled out, flat, yearly fees instead of scaling fees, or those which go up as the value of the account increases. As your account grows or gains in value, the fees under scaling plans are constantly getting higher as well. It is also advisable to pick out a depository which provides the choice for segregated storage of the precious metals, and better still if they do not assess an extra fee for this important level of storage protection. Regarding transfer fees, the government does not assess any penalties for transferring over traditional forms of IRAs into precious metal IRA variants. [learn more about fees, costs and commissions]

Gold IRA Rollover Rules

It should not come as much of a surprise that the Internal Revenue Service enforces a number of stringent and specific rules for Gold IRA accounts. Consider yourself lucky that they allow you to inventory such precious metals at all. Until the Taxpayer Relief Act of 1997 was passed by Congress, neither precious metals nor collectible coins of any kind could be included in the self directed IRA retirement vehicles. Now this has changed much for the better, but you should still be clearly aware of the various IRS rules that apply to these precious metals IRAs.

In order to have a Gold IRA, you will have to first open it with an IRS approved administrator. There are many administrators in the country today, ranging from insurance companies, to banks, to retirement companies. The important thing to remember is that not every one of these administrators will be able to handle a gold IRA. Even ones that do handle these types of IRAs may require that you open up a new account in order for it to be a self directed IRA.

Learn more in our Gold IRA Rollover pages.

Gold IRA Storage

Once your new precious metals have been purchased, they must be stored according to IRS guidelines for precious metals IRAs. This is where your custodian comes into the picture. The role of the custodian in a self directed IRA is critical, since you the investor are never allowed to have in your personal possession the coins and precious metals at any point. You also can not buy the gold with the intention of handing it off to your administrator or custodian. If you have possession of the assets for even a single day, the IRS will then treat your metals as distributed and start assessing the appropriate penalties and taxes on them.

Learn more in our Gold IRA Depositories page