Gold IRAs: 5 Things to Know Before You Invest

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There are dozens of possible investment accounts and strategies you can use to build wealth and save for retirement. Gold IRAs aren’t typically mentioned when the short list of retirement planning options are rattled off by financial advisors – but perhaps they should be.

What follows are five things you should know about gold IRAs before you invest.

1. What is a Gold IRA?

If you’re interested in holding physical gold as part of your investment strategy for retirement, you can’t just buy gold and somehow label it as being part of your standard IRA account. It doesn’t matter if you have a traditional IRA or a Roth IRA, a lot of gold or a little bit of gold – it can’t exist in a standard IRA.

You can always put it in a safe as part of your own personal savings, but it won’t get the tax benefits that come with keeping it in an IRA. In other words, you need another option.

“Also known as a precious metal IRA, a Gold IRA works pretty much like a standard individual retirement account: the same contribution limits and distribution rules,” BusinessInsider explains. “However, instead of holding paper assets like stocks and bonds, the Gold IRA is earmarked for holding physical bullion — that is, coins or bars of gold and other approved precious metals, including silver, platinum, and palladium.”

With a gold IRA, you don’t technically hold the physical asset. (Meaning, you don’t keep it under your bed or in a lock box at your local bank.) The IRA is responsible for keeping and managing your physical gold for you.

2. Why Should You Get a Gold IRA?

Why would you invest in a gold IRA? Well, there are several reasons.

For one, it’s one of the few ways to truly diversify your IRA portfolio independent of stocks and mutual funds. Historically, it’s been an uncorrelated asset that’s done extremely well during stock market crashes and economic uncertainty.

Secondly, it’s a great hedge against inflation and deflation. In other words, it basically makes your portfolio inflation proof (which is highly attractive right now).

Third, it’s very easy to take an existing IRA and roll it over into a gold IRA and still maintain the tax preferential treatment.

3. Who is Your Gold Custodian?

One of the unique aspects of a self-directed IRA is that you’re required to have a custodian associated with your account. This is the person who has legal authority to store your gold. This individual does not have the ability to transact your gold. Instead, they oversee and protect your investments.

When choosing a custodian, make sure they’re officially licensed. If you partner with an unlicensed custodian, you could actually lose your investment. You also have to consider fees. Custodians charge fees for their service. The cost fluctuates from company to company, so do some research to avoid getting overcharged.

4. You Can Rollover a Standard IRA into a Gold IRA

Did you know that you can take a standard IRA (Roth or Traditional) or 401(k) and perform a rollover into a gold IRA?

When performing a rollover, you can do a direct rollover or an indirect rollover. With the direct option, the entire IRA goes from one custodian to the next. In other words, all investments in your current IRA are liquidated and then sent to the custodian of your gold IRA for investing into gold.

With the indirect option, your IRA broker sends you a check for a portion of your funds and you pass it along to your IRA custodian. This process must be completed in 60 days or less to avoid a penalty from the IRS.

5. You Can Hold More Than Physical Gold

Within a gold IRA, you can also hold gold stocks (which are shares of gold mining companies), gold mutual funds (which invest in bullion or stocks), and even gold ETFs that track the gold indexes. While most of these investments are going to move in a similar direction – meaning when gold is up, it’s likely that ETFs, mutual funds, and individual gold stocks are up – diversifying within the asset class is still a good idea.

Is a Gold IRA Right for You?

Even if you aren’t ready to entrust your entire IRA or retirement portfolio with gold, you can always use a gold IRA as a form of diversification. Because gold tends to act independently of the stock market and inflation, it makes for a great asset to hold during times of uncertainty. Consider putting a portion of your investments in gold and you’ll have a much more stable portfolio.