A gold IRA is a self-managed individual retirement account that invests in both physical gold and other precious metals. A gold IRA often has higher fees than a traditional IRA or Roth IRA, which invests exclusively in stocks, bonds, and mutual funds. A gold IRA is a type of self-directed IRA that allows you to invest in gold bars for retirement. In a regular IRA, you can’t own physical gold, although you can invest in a wide variety of assets that are invested in gold, such as gold stocks or gold ETFs.
If you take personal control of the physical gold from a self-managed IRA, the IRS counts it as a payout, meaning you may face taxes and penalties for early withdrawals. In some cases, the IRS is authorized to close your entire account. Another benefit that investors can take advantage of with a self-directed IRA is the ability to invest in precious metals. The Internal Revenue Service (IRS) sets the rules for all retirement accounts, and all IRAs are prohibited from certain transactions, regardless of the specific type of IRA. As with most investment comparisons, the difference between traditional and self-directed IRAs is not so much that one is the better option than the other, but more in how each route works for the individual investor.
Because they are managed by the investors who open them, self-directed IRAs also require a more active approach and therefore require more time and effort than traditional IRAs. These funds buy up a basket of gold-related investments, such as stocks in various gold mining companies. The IRS does not allow popular gold coins such as the South African Krugerrand or British sovereign coins to be stored in a gold IRA. However, the IRS has introduced additional tax filing and recording requirements for gold IRAs due to the more complicated assets they own.
For more experienced investors who want to take advantage of the preferential tax status of an IRA and who feel more comfortable exercising control over the assets they invest in, a self-directed IRA may be more suitable. Your custodian bank can refer you to an approved institution and process the gold transfer as part of setting up your Gold IRA. Still, a gold IRA can be a good option for investors who want to diversify their retirement accounts and also take advantage of the hedging benefits that the yellow metal offers over other financial assets, such as fiat currency and stocks. Gold in particular is generally seen as an inflation hedge because it holds its own and even rises at times when the value of the dollar falls.
With a self-directed IRA (SDIRA), which can be either a traditional IRA or a Roth IRA, the account holder makes all investment decisions through a custodian bank or broker. Remember that not every self-governing IRA custodian bank offers the same investment options. So make sure that physical gold is among their offerings before you open an account.
