Is It Worth It to Get a Gold IRA?

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An excellent way to balance your portfolio is to get a gold IRA. When the stock market is not performing well, gold prices usually increase. It makes gold a safe way to help protect your other investments from big losses.

Before investing in gold or a gold IRA, here are some things you need to consider.

Contribution Limits

The contribution limits for a gold IRA are the same as any IRA. For 2023, the limits are $6,500—unless you are 50 or older, then you can contribute an extra $1,000—or $7,500. In 2024, you can contribute $7,000 or $8,000 if you are 50 or older.

Two kinds of IRAs allow you to contribute much higher amounts. A simplified employee pension (SEP) IRA can be set up by a small-business employer or by self-employed individuals. This plan allows employers to make contributions to their employees. For this kind of account in 2023, the Internal Revenue Service limits contributions to the lesser of 25 percent of salary, or $66,000 ($68,000 in 2024).

A savings incentive match plan for employees (SIMPLE) IRA enables both employees and employers to make contributions. The total contribution limit in 2023 is $15,500. It will be $16,000 in 2024.

The Self-Directed IRA (SDIRA)

Regular IRAs do not hold gold or other precious metals. They are limited to holding stocks, mutual funds, and bonds. A self-directed IRA (SDIRA) can hold various assets, including gold. Many banks do not offer SDIRAs, but you can find them with some banks, credit unions, trust companies, and brokerage firms, so you will have to do some searching to find a custodian you like.

The SDIRA and Taxes

You can hold gold in a SDIRA that is traditional or a Roth-type SDIRA. If you get a traditional one, contributions are tax-deferred, but you get a tax deduction, and you pay the taxes when you withdraw from the account. Required minimum distributions must begin when you turn 72.

In a Roth SDIRA, all contributions are made with after-tax money, so there are no taxes on withdrawals. Withdrawals made before the account is five years old and before you are 59½ will likely face penalties (10 percent). A Roth IRA does not have required minimum distributions.

The Forms of Gold

Once you decide on an SDIRA for your gold, you must decide what kind of gold assets you want to put into it. Investopedia says that you can choose to buy gold bullion or gold coins. You can also choose to invest in gold stocks, gold mutual funds, or gold ETFs. You can also add other precious metals including silver, platinum, or palladium.

According to Annuity, a gold IRA can contain gold coins of various ounce weights, including one, a half, a quarter, or a tenth. Silver coins must be one ounce in weight. Gold and silver coins must be minted by the Treasury Department to ensure their purity or fineness. All bullion must meet a minimum fineness: gold, 0.995+; silver, 0.999+; platinum, 0.9995+; and palladium, 0.9995+.

Because the purity of the coins must be of the highest quality, BusinessInsider mentions that you cannot buy gold on your own and put it into your gold IRA, nor can you add any gold you already own. The custodian of your account must handle all transactions.

A Warning for Investors

Forbes warns investors that some companies are offering gold IRAs that are less than honest in their prices. While they seem to be upfront about their prices, they charge much more than the average price of gold on the market.

Some of the above-average prices are listed in the above Forbes link. Also, Forbes provides information about minimum purchase requirements that you must meet to open an account with the various gold IRA companies. Some have no minimum requirements to open an account, but some companies require more than $10,000 to get started.

USAToday mentions that when you buy gold, you can expect to pay more than the market value. Also, when selling your gold, you may be given less than market value. To avoid loss, only sell your gold when it is considerably higher than when you bought it.

The Regulations

Before you buy gold precious metals for an SDIRA, be aware that you can only buy it from approved sources. Also, physical gold can only be held in IRS-approved storage facilities. You are not allowed to keep it in your home or even in a safe deposit box.

The Cons of Investing in Gold

• Unlike a stock, you will not receive any interest or dividends from your gold investment.
• Gold for your SDIRA cannot be purchased from any source. The IRS wants to ensure that you only have the finest gold. Because of this, you can only purchase gold from your custodian. Also, the IRS must approve of the storage facility used to protect your gold.
• When it comes time to sell, the liquidity may not happen right away. Due to the slower speed at which gold can sell, you may lose the best opportunities for selling at the best time.
• The costs for maintaining a gold account with physical gold are higher than the fees attached to stocks, mutual funds, and bonds. You must pay for the gold transfer, storage, and account maintenance.

A gold IRA can be an excellent way to diversify your portfolio and retirement accounts. So, if you are asking, is it worth it?—only you can provide that answer. Before you buy gold IRA, consider the costs involved, which vary considerably for the cost of the gold, the transfer, the storage fees, and the maintenance fee. Be sure to look carefully at all the information and compare it with other companies. Check reviews on each company, too.

The Epoch Times copyright © 2023. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.