Baby Boomer Beginners Guide: GOLD IRAs Made Simple
While collectibles are off limits for IRA investments, don’t overlook gold.
It may seem like a fancy collectible, but at one time it powered the Federal Reserve. Gold was what backed the use of paper money as a promissory exchange and in theory it still does.
In This Post You Will Discover:
- What a gold IRA is
- Why opt for a gold IRA
- What other precious metals are accepted
- Storing Your Metals
- How to receive your distributions
Let’s go!
What a Gold IRA Is
Simply put, a gold IRA allows gold to be held in custody for the IRA account holder. It’s just like holding physical rather than paper assets. The gold can be held in either bars or coins and this kind of IRA usually suits a self-directed fund.
Gold coins accepted are:
- American Gold Eagle bullion or proof coins
- Canadian Gold Maple Leaf coins
- Austrian Gold Philharmonic coins
- Australian Kangaroo/Nugget coins
- Chinese Gold Panda coins
- American Gold Buffalo uncirculated coins (not proofs)
In 1997, the Taxpayer Relief Act provided an allowance for IRA investments of one, half, quarter or one tenth ounce U.S. gold coins, or one ounce silver coins that were minted by the Treasury Department.
Other Accepted Precious Metals
Silver
- American Silver Eagle bullion or proof coins
- Canadian Silver Maple Leaf coins
- Austrian Silver Philharmonic coins
- Australian Silver Kookaburra coins
- Chinese Silver Panda coins
- Mexican Libertad coins
Platinum
- American Platinum Eagle coins/proof coins
- Canadian Platinum Maple Leaf coins
- Isle of Man Noble coins
- Australian Platinum Koala coins
Palladium
- Canadian Palladium Maple Leaf coins
In all metals, bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements are also accepted.
So, having established whether your precious metal is acceptable as an IRA contribution, what happens next?
Why Use a Gold IRA
Many see gold as a method to hedge their bets against inflation. Traditionally, gold has maintained a high value during downturns in economy.
That’s not to say that it has increased value. The difference is important to note. The idea that gold always increases is a popular urban myth. Gold’s value, like any other tradeable commodity, depends on how much people are willing to buy it for.
Storing Your Metals
The process for starting your gold IRA is the same as for regular IRAs. Contact your institution of choice: a bank, savings and loan association, or a federally insured credit union.
You can’t look after your own gold in a gold IRA. It must be held for you by an appointed trustee.
Private depositories are possible, but the disadvantage is that they may require a large insurance policy.
You may lower your outgoings by investing in a self storage IRA
Receiving Distributions
Gold IRA distributions are received in the same way as regular IRAs. You have the choice: take a cash payment equivalent to the value of the gold, or take back possession of the physical gold.
Both will be taxed.
Taxes are not taken from any increase in the gold itself, but when you withdraw the money which results from its sale.
Smart investors use gold as part of a Roth IRA.
In this way, you can avoid paying tax on withdrawals when you retire. If your account is over five years old, the same applies if you withdraw early and are over 59.5 years of age.
What You Have Learned
- What a gold IRA is and what types of gold are acceptable as IRA investments vs. those considered to be collectibles (all the ones not listed as acceptable in this article)
- What other precious metals are also acceptable
- Where to legally store your gold and the insurance pitfall of doing so in a private depository vs. a bank, loan association or federally insured credit union
- What tax is due on distribution of a gold IRA, and how to avoid tax by using gold as a contribution to your Roth IRA
But you’re not done yet… move now to:
What to do Next
- Establish if any gold you own qualifies for use in an IRA – if necessary consult the NYMEX and COMEX links above to help clarify
- Consider the market price of gold and make a decision as to whether or not gold appeals to you as a relatively inflation-proof investment
- Contact a bank or other legally entitled institution as named above to open a Roth IRA and inform them you wish to use gold as an investment
Enjoy!