Types of Gold IRA Accounts: Which One is Right for You?

A gold individual retirement account (IRA) is a self-directed IRA that offers more control over your investment options than a typical 401(k) plan. Most 401(k) plans come with high fees and limited options. Opening a gold IRA places control of your financial future back in your hands.

There are several options when it comes to investing in gold and gold IRAs. Here we will cover the basics before diving deep into the specifics to address the most common questions that arise when an investor considers adding gold to diversify their portfolio and hedge against volatility.

As with any investment, there are benefits to gold IRAs and some drawbacks. When planning for retirement, these benefits become critical to sound decision-making. You must understand the process, requirements, and limitations of investing in gold and precious metals. We will cover them all and provide you with the information you need to decide if gold suits you.

What is a Gold IRA?

A gold IRA allows the owner to purchase precious metals, including gold bullion, silver, platinum, palladium, and other precious metals, in a qualified retirement account. As with all retirement accounts, there are regulations.

The investor may also invest in

  • Precious metal mutual funds
  • Exchange-traded funds
  • Gold stocks

Determining whether you want to invest in gold and other physical precious metals or stick with the paper investments above requires careful consideration. However, if you are considering a retirement account or gold IRA rollover, you have come to the right place.

How Does Gold IRA Work?

man in suit hold dollar bills and gold bars

Before investing in a precious metals IRA, you should understand a few significant differences between these accounts.

First, you cannot create these accounts with traditional brokers. You cannot use a conventional broker because you are physically purchasing precious metals. Gold IRA companies exist for this purpose.

Moreover, since you are buying physical gold and other precious metals, you will face storage fees from the gold IRA company.

A Gold IRA is distinct from a traditional self-directed IRA account but generally follows the same rules concerning contributions, distributions, and taxation. The primary difference is that gold IRA investors have a broader array of investment options.

Types of Gold IRA Accounts

As with all retirement accounts, including a traditional IRA, gold IRAs come in several different types. Each type will have slightly different tax advantages depending on whether they are funded with pre or post-income tax dollars. Their yearly contribution limits and distribution rules also vary.

Before determining the best type for you, it is crucial to understand the main differences between the three most popular options.

Traditional Gold IRA

The investor funds traditional gold IRAs with pre-tax income. The IRS caps the yearly contribution amount, but up to that amount, contributions are tax-deductible from an investor’s personal income tax. Additionally, investors can spread their yearly deductible across multiple IRA accounts.

Since contributions are from pre-tax income, investors must pay taxes on distributions during retirement. Additionally, the IRS requires mandatory distributions (RMDs) beginning at age 72. RMDs are worth thoughtful consideration because they compel you to sell, and precious metals are not as fungible as traditional investments.

Roth Gold IRAs

Like a typical Roth IRA, a Roth gold IRA receives funding from after-tax dollars. Therefore, as with any Roth IRA, the investor will not pay taxes on distributions. The tax benefits of Roths arrive on the backend.

There are also yearly contribution limits and penalties for the early withdrawal of retirement funds.

SEP Gold IRAs

A SEP is an acronym for Simplified Employee Pensions. A SEP Gold IRA is similar to a traditional gold IRA with two distinct differences.

First, they exist for business owners and the self-employed. Second, their yearly contribution limits are significantly higher. An investor can contribute the lesser of 25% of their annual income, or $53,000 per year.

As with any pre-tax IRA, investors must pay income tax on distributions during retirement.

Which Gold IRA Account is Best For You?

nest with three gold eggs on wooden table

Determining which type of account is best for you requires experienced financial planning advice. It is a good idea to discuss your situation with your financial advisor before selecting the best account type for you. There are tax consequences and benefits to each of the gold IRAs, and reputable financial advisors should be able to guide you properly.

They will need to take stock of your age, investment horizon, and finances to have an overall picture and advise you appropriately. In addition, gold IRAs come in different shapes and sizes, so it is crucial to find the one that fits you best.

What Type of Gold Can You Put in Your Gold IRA?

There are restrictions on the types of precious metals investors may place in gold IRAs or precious metals IRAs. Only approved precious metals qualify.

Specifically, this amounts to only authorized bullion, precious metal coins, rounds, and bars of gold, silver, platinum, and palladium.

All gold must meet a purity standard of 99.5%. Many gold bullion products meet this standard, but you should double-check before trying to add them to your self-directed gold IRA.

Additionally, some collectible gold coins qualify for a gold IRA. The following is a list of the approved physical gold investments:

All silver coins must meet a purity standard of 99.9%. Some of the approved silver investments include the following:

All platinum and palladium must meet a purity standard of 99.95%. Some of the approved platinum coins and palladium coins include the following:

  • American Eagle platinum or proof coins
  • Canadian Maple Leaf coins
  • Platinum and palladium bars and rounds produced by an NYMEX or COMEX-approved refinery

This list is not comprehensive. It merely indicates the types of physical gold you can place in your individual retirement account. You can view a complete list of our gold, silver, platinum, and palladium products approved for gold IRAs to learn more.

How to Open a Gold IRA Account

happy couple starting a gold ira account

Opening a gold IRA requires the following steps.

First, select a certified custodian. Selecting a custodian is essential, as they are responsible for keeping your gold safe. Investors commonly choose one of the following to serve as the custodian for their gold IRAs:

  • Banks
  • Brokerage firms
  • Trust companies
  • Credit unions
  • Savings and loan associations

Certified financial institutions and brokerage firms are not surprisingly the frequent choice of investors. Additionally, many gold IRA companies work with their own custodians that they can recommend to investors.

Next, select a gold IRA company. This is important. This company will engage in all the administrative functions that allow your gold IRA to operate correctly. Gold IRA companies come in many different varieties, but the good ones will:

  • Open your accounts
  • Transfer funds
  • Purchase precious metals
  • Handle the shipping to the gold IRA custodian

Examine their history, reviews, insurance, and licensing before deciding. Their job is to make the entire process smooth.

Learn how to get started with your gold IRA.

Is there a Minimum Investment for Opening a Gold IRA Account?

While there is no standard minimum investment for precious metals IRA, custodians have their own minimums. You may need to transfer at least $10,000 into your gold IRA to meet this minimum.

Investors should also understand that gold IRAs have more costs and fees than traditional IRAs. For example, investors must pay an account creation fee and a yearly administrative fee for their gold IRA to start.

In addition, you will need to pay the following costs associated with precious metals IRAs. These include all of the following:

  • A purchasing fee on top of the price of the precious metals. This fee could be a flat rate or a percentage up to 33%.
  • Yearly maintenance fees of up to $300
  • Storage fees in an IRS-approved depository are as high as $225 a year
  • Commission fees each time you sell or purchase precious metals, up to $50
  • Liability insurance for your precious metals averaging $250 a year
  • Early termination fees averaging $150

These fees indicate the standard costs associated with Gold IRAs when you decide to invest in gold. So you will need additional funds to purchase your gold, gold coins, platinum, and palladium. These fees are purely administrative.

How to Buy Gold for Your Gold IRA Account

shopping cart full of gold bars with coins around

Now that you have your new gold IRA account, it is time to fill it with gold. There are two options.

First, you can roll over any existing gold into your self-directed IRA. Second, with your IRA funded, the gold custodian you selected can access your funds to purchase gold for your IRA.

The custodian will also handle delivery and storage. We are happy to assist you if you have any questions about available products or custodian services.

Can You Roll Over Your Existing IRA to a Gold IRA?

You can convert an existing 401(k) or traditional IRA into a gold IRA. The two main methods are through an IRA transfer or a rollover.

Gold IRA rollovers come with some tax consequences and penalties that transfers do not. Please read our complete guide to rollovers for more information.

Why You Should Invest in a Gold IRA Account?

Gold IRAs offer the investor two distinct advantages diversification and hedging against the market to create stability. Any coherent investment strategy should include diversification. Precious metals provide diversification to the typical investment instruments available in a Roth IRA or traditional IRA.

Gold IRAs offer stability when traditional markets are in flux. Gold and other precious metals tend to rise during this time, offsetting any losses in the stock market. Moreover, as investors age, their risk tolerance diminishes accordingly. With a shorter investment horizon, stability is worth its weight in gold.

If, after reading this article, you are interested in starting your own gold IRA, call 833-600-GOLD today or contact us through our online form to discuss investing in precious metals through Oxford Gold Group.

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