Gold IRA Review

A gold IRA is a niche investment product. This specialized IRA can help diversify a portfolio because precious metals, including gold, are often considered an investment to beat inflation. But make sure to do your due diligence when researching whether a precious metals IRA account makes sense for part of your retirement funds.

Many of these companies allow investors to buy precious metals that include silver, platinum and palladium in their IRAs in addition to gold. A gold IRA is distinctive because the account holder owns the actual precious metals, as opposed to stocks or shares of funds in mining companies.

What is a gold IRA?

Like a traditional IRA where you might hold stocks, bonds or mutual funds, a gold IRA is a tax-preferred investment vehicle — and the only option for holding precious metals in an IRA. You might also come across the term “precious metals IRA” used instead of gold IRA. Although the former is technically accurate, the phrase “gold IRA” is the one that tends to stick in the public imagination.

Gold IRAs are classified by the Internal Revenue Service as self-directed IRAs. According to IRS regulations, self-directed IRAs can hold alternative investments such as precious metals. (In their tax treatment, a gold IRA is different from a Roth IRA, which is an after-tax savings vehicle.

How does a gold IRA work?

The process of setting up a gold IRA involves several parties. First, you open up the account and buy precious metals from a company like the ones highlighted here. If you elect to fund the account with assets currently in another IRA, the gold IRA company will help you manage the rollover (more on that process below).

The gold IRA company also coordinates the involvement of the financial firm tasked with being the account custodian, as well as the depository institution where the precious metals you purchase are held. (You are not allowed, per IRS rules, to keep IRA gold at home.)

Gold IRA companies differ in that some let you choose between multiple custodial firms and depositories, while others require you to use a custodian and depository of their choosing.

Gold IRA rollover

A number of different kinds of retirement accounts can be used to fund a gold IRA via a rollover. You can roll over money held in a 401(k), 403(b), 457, pension or Thrift Savings Plan account without triggering a tax liability or penalties.

Is a 401(k) to gold IRA rollover right for me?

A gold IRA is a product best suited for sophisticated investors. If you have questions, consult with a financial advisor who is a fiduciary to decide whether gold makes sense in the context of your existing retirement investment portfolio. Gold IRA companies are not investment companies that have a fiduciary duty to act in your best interest. Their sales representatives should not be relied on for financial advice.

If you rollover a 401(k) to a gold IRA — as in, sell the entire balance of a conventional account containing stocks, bonds and/or mutual funds in order to invest in gold — you’re making a very big change to your investment profile. Doing so should be extensively researched beforehand. If you’re unsure, take some time to learn the difference between an IRA vs. 401(k).

A conventional retirement account gives you the opportunity to be exposed to a variety of assets. This confers some important benefits, allowing you to:

Generate income via dividends
Establish a diversified investment mix to mitigate market risk

Use market liquidity to adjust your allocation to your investing goals

Some gold IRA companies refer to their offerings as “diverse” because you can hold more than one kind of precious metal in it. From an investing perspective, this is not diverse, because precious metals — even different ones — are part of the same asset class. Gold also does not generate income, unlike dividend-earning assets.

Be sure to factor in the costs of cashing out as well: When you reach the age of 72 and must begin taking RMDs from your retirement accounts, you need to have your gold coins and gold bullion sent to you. That entails paying for shipping and insurance, or liquidating some of your gold.

Most gold IRA companies will buy back gold they sold you initially, but buybacks are generally at the wholesale price, which often is around 30% lower than the prevailing retail price.

Before opening a gold IRA, consider the context of your broader wealth-management strategy, and set realistic expectations about how much you anticipate your investments growing, and how long you should plan to hold those assets.

How does a 401(k) to gold IRA rollover work?

If you’ve decided a gold IRA is right for you, you can contact your retirement plan administrator to initiate the rollover or have the gold IRA company perform a direct rollover between the two companies. This kind of institution-to-institution transfer is recommended because you never take control of the funds yourself, which spares you the risk of a potential tax penalty.

If you do choose to handle that distribution yourself, the IRS has strict rules you have to follow: You have a 60-day window from the date you receive the funds to roll that money over into another qualified retirement account, or the IRS will treat that distribution as a withdrawal and charge you taxes plus an early withdrawal penalty if you are younger than 59 ½ years old.

You can roll over just part of the balance of another retirement account to fund a gold IRA — although keep in mind that some gold IRA companies have minimum order sizes of $50,000, which might limit your ability to retain enough funds in your old account to maintain a portfolio allocation that will sustain you in retirement.

Invest in a gold IRA

The precious metals in a gold IRA are generally coins and bars, some of which carry higher mark-ups than others. You can choose a mix of gold and silver, and some gold IRA companies also have platinum and palladium available that you can buy and hold in your IRA. When you must begin taking required minimum distributions, you can choose to liquidate the gold or have it shipped to you. In most cases, you will pay for shipping, so make sure to factor in that expense.

Most gold IRA companies will buy back gold or other precious metals they sold you, but buybacks are generally conducted at the wholesale price, which is about a third cheaper than the retail price.

How do you hold physical gold in an IRA?

Unlike a gold ETF, an exchange-traded fund that tracks the performance of gold, a gold IRA lets you hold the physical precious metals in an IRS-approved depository institution. If you want more flexibility with your precious metals, you might want to learn how to buy gold outside an IRA. If you don’t want the complications of investing in physical gold, you can research how to buy a gold ETF.

Gold IRA cost

Gold IRA expenses are generally higher than the expenses associated with conventional retirement accounts like 401(k)s. If you have a gold IRA, you will incur costs to manage and maintain the account, as well as to store and insure your gold. Precious metals prices can also be volatile over time.

IRA-eligible gold

There are a number of types and forms of precious metals the IRS has approved as IRA-eligible. Certain coins and bars manufactured by the U.S. Mint, the corresponding agency of certain other countries, or designated private minting companies, can be held in a gold IRA.