Gold IRA FAQ’s: Everything You Need To Know

Below are some frequently asked questions we receive about gold IRAs.

Inflation can be very bad for investors when inflation rates outpace investment gains. According to classical economics, one of the main causes of inflation is governments increasing the money supply faster than productivity gains. The more fiat currency in circulation, the less each dollar is worth.

Since there is a finite amount of gold on the planet, it is more resistant to inflationary pressures than fiat currency, which governments can print. Gold tends to increase in value during inflationary periods because 1) it is a dollar-denominated commodity, and 2) investors buy up gold supplies as a hedge against devaluation, which increases gold’s price.

Several factors determine the price of gold in international markets:

  • Demand
    Like any commodity or asset, global demand for gold puts upward pressure on gold prices internationally.
  • Inflation
    Inflationary pressures can cause international pricing increases in gold as a response to weakening fiat currencies.
  • Interest
    Interest rates and gold prices share an inverse relationship. Raising interest rates causes the price of gold to fall, while lowering interest rates causes it to rise.
  • Currency fluctuations
    Because gold prices are in USD, currency fluctuations can affect gold price conversion rates into different currencies.
  • Geopolitical factors
    Lastly, political factors such as disasters, crises, and wars can positively affect gold prices as more people put their money into gold to safeguard their wealth.
A gold IRA is a variation of a traditional IRA that allows you to store your wealth in precious metals rather than intangible assets like securities. Despite the name, gold IRAs often contain silver and other precious metals, like platinum, in addition to gold bullion. They may also contain gold ETFs, gold stocks, and gold mutual funds. Current regulations prohibit putting precious metals into a regular IRA, so you need a separate gold IRA to manage those physical assets. Otherwise, gold IRAs essentially function the same as traditional IRAs. They have the same contribution limits and distribution rules.
  • Pros
    • Gold IRAs provide the same tax benefits as traditional IRAs. Your
      investments can grow tax-free, and you can withdraw funds from Roth
      IRAs tax-free.
    • Unlike other assets, gold is relatively stable and can act as a hedge
      against inflation. Investors often start putting their money in gold when
      traditional financial markets face a downturn.
    • Since gold holds its value well, it makes a great option for long-
      term investments for retirement. Most gold IRAs are self-directed, so
      you more or less have full control over your investment portfolio.
  • Cons
    • Unlike stocks, you do not get interest or dividend payments from
      gold investments.
    • There are several limitations on how you add gold to your IRA. You
      cannot directly transfer gold into your account and must pay a
      custodian to do it for you.

A gold IRA rollover allows you to transfer funds from an existing retirement account into a new gold retirement account. To perform a gold IRA rollover, you must first find a provider and a custodian to facilitate the transfer process. The provider serves as an intermediary while the custodian holds the actual, physical gold.

You can perform either a direct rollover or an indirect rollover. With a direct rollover, your previous providers give your funds directly to the new custodian. With an indirect rollover, your previous provider gives you the funds, and you can allocate them how you want.

The IRS has strict requirements for transferring 401(k) funds to a gold IRA. You must complete the transfer within 60 days of receiving the funds to avoid any fees. If you do a rollover transfer, you effectively avoid the 60-day limit and penalties.

If you do not transfer your funds within 60 days, the IRS will count that money as income and tax it under your current bracket. As with any other traditional IRA, account holders younger than 59½ will have to pay a 10% fee if they withdraw funds.

Federal law requires that all precious metals in a gold IRA be held by a custodian, meaning that individual investors cannot store their IRA gold at home or in a bank safety deposit box. However, you can take physical possession of gold through IRA distributions.

As an investor, you have two options for taking possession of gold in your IRA. Your custodian can send you the actual, physical gold, or you can liquidate your assets and take their value in cash. Most gold IRA companies have streamlined processes to help investors take possession of their gold investments.

Until the 1980s, the government did not allow precious metals and collectibles as valid investment vehicles for IRAs. Nowadays, the IRS treats IRA-owned gold investments like other retirement investments. Below are some key facts about the tax treatment of gold IRAs.

  • Just like a traditional IRA, investors must pay taxes whenever they take money out of their gold IRA account. The IRS treats these withdrawals like ordinary income, so your income bracket determines taxes.
  • The IRS does not consider gold in an IRA as a collectible, so you do not have to pay the traditional 28% collectibles tax on your precious metal assets.
  • If you withdraw money from your gold IRA account before the age of 60, you’ll have to pay a 10% early withdrawal fee.
  • Unlike securities, you cannot deduct losses from gold investments on
    your tax return.
  • Similar to traditional IRAs, you must start making mandatory minimum withdrawals from your gold IRA once you reach 70 years of age.

There are some nuances surrounding opening a precious metals IRA compared to a traditional IRA or Roth IRA.

First, you must find a gold IRA custodian. Remember that individual investors cannot physically possess their gold IRA investments. They must hire a custodian to hold the assets for them. The IRS keeps an index of approved, non-bank institutions that can act as custodians.

Next, you need to find a precious metals dealer. Your custodian takes your money and purchases assets from the dealer. Custodians will charge a small fee for transportation, handling, and storage.

Now that you have a custodian and a metals dealer, you can choose which precious metals you want to buy. Common choices include gold bullion and gold and silver coins. IRS-approved precious metals must meet certain purity standards, depending on the type of metal.

After buying, you need a depository to store your gold. Most custodians offer storage services, but you can choose a separate depository as long as it is IRS approved. Depositories are necessary for gold IRAs as individuals cannot store precious metals themselves.

After choosing a depository, your custodian will purchase your metals from the dealer and store them in the depository. If you want access to your funds, you will have to go through your custodian to make withdrawals. Alternatively, most people work with organizations that provide a turnkey service for their clients. We reviewed and compiled a list of reputable gold IRA companies that can help you get started and answer all of your questions.

Which IRA company is best depends on your investment goals and personal preferences. Below are some important considerations when choosing between precious metal IRA companies.

  • Find a company that allows gold ETFs and gold stocks. These kinds of investments diversify your portfolio.
  • Custodians that charge lower fees are better for your investments.
  • Flat account fees are better if you expect to invest a large amount.
  • Some custodians have eliminated withdrawal penalties.
  • Consider opening a Roth gold IRA in addition to a traditional gold IRA.

Precious Metals IRA Guide has more detailed information about opening a precious metals IRA and gold investments. Check out our homepage for more information!