view ChartGold IRA Pros and Cons: What You Need to Know
If you’re considering investing in a precious metals IRA, you’ll want to read the following gold IRA pros and cons. With inflation at 40 year highs, and a skyrocketing national debt, you’re not alone. Many investors are turning to gold backed IRA investments to secure their retirement savings.
But is a gold IRA account right for you? You’ll know within the next 7 minutes. Because we’re going to cover all of the gold IRA pros and cons so you can make an informed decision.
We’ll even dive into how to choose a reputable gold IRA rollover company. And some common pitfalls first time gold investors need to watch for.
Let’s get started!
The Basics of Investing in a Gold IRA
A gold IRA is a self-directed IRA account that permits you to own physical gold, silver, platinum, and palladium.
How a Gold IRA Works
Setting up a physical gold IRA account is straightforward. Here’s how it works:
- Choose a reputable gold broker: You’ll need to select a trustworthy gold dealer to guide you through the process. Look for one with a flawless reputation, no client complaints, excellent customer reviews and extensive experience. Be sure to read the 9 gold IRA scams report which is vital in choosing the best company.
- Open an account: Once you’ve chosen your broker, you’ll need to open an account with a self directed IRA custodian. Your gold dealer should help you complete the paperwork.
- Fund your account: Next, you’ll fund your new IRA account by transferring cash from an existing retirement account.
- Buy gold: Once your IRA is funded, you can buy precious metals through your gold dealer. They will help you to create an investment portfolio based on your needs. You will then need to sign an Investment Direction form authorizing the transaction.
- Store your gold: Finally, your gold dealer will ship your precious metal to your selected IRS approved depository for secure storage.
Gold IRA Pros
Investing in a gold IRA offers quite a few advantages, which we will explore in detail below.
You Own Real Gold
One of the biggest advantages of investing in gold IRAs is that you own real physical gold. With paper or digital assets such as gold ETFs, gold certificates, futures, stocks or gold mutual funds, you don’t own real gold or silver. Many investors prefer to own the physical gold bullion outright which is why they choose a self directed IRA which gives investors more control.
Storage is Easier
With gold IRAs, you don’t have to worry about storing your metal yourself. Precious metals can be bulky, especially silver. And storing a significant amount of gold and silver coins at home can be risky.
With a precious metals IRA, your metal is safely stored at a 3rd party, non-bank, privately owned depository. It’s also comforting knowing your gold and silver IRA is fully insured by Lloyds of London.
Tax Benefits
Another big advantage of a gold IRA is the tax benefits. Your precious metals can grow tax-free. You only pay taxes when you take a distribution from your IRA account.
Precious metals held outside of retirement accounts are considered collectible by the IRS. The capital gains rate on personally held collectables can be up to 30%.
However, if you sell metals inside an IRA and take cash distributions after 59.5 years of age, then the cash distributions will be taxed as additional income.
If you have a Roth gold IRA, you can always take tax free withdrawals. But if you’re under 59.5, you’ll have to pay a 10% early withdrawal penalty. Visit our gold IRA tax rules page for more information.
Portfolio Diversification
Adding precious metals to your investment portfolio can help diversify your assets and minimize portfolio risk.
Gold has historically moved inverse to other assets like the stock market, mutual funds and bonds. This makes gold backed IRA accounts an excellent hedge against market volatility.
Inflation Hedge
Gold has an unparalleled track record as a hedge against inflation. As the the dollar drops in value, gold IRA investments often go up. But not because gold coins are becoming more valuable. It’s just that the weaker dollar buys less of them.
Investing in a gold IRA can help protect your retirement savings from the eroding effects of record high inflation that erodes your purchasing power.
More Investment Options
Gold IRAs are much more flexible than traditional IRAs. Self directed IRA custodians also allow you to invest in other alternative asset classes than precious metals. Such as real estate, private placements, futures, private debt and more.
This is a big benefit for the millions of investors that don’t like stock and bond markets.
Potential to Take Physical Possession
With a gold IRA, you have the potential to take physical possession of some or all of your precious metals should you choose. Granted, it’s considered a distribution and you will give up the tax advantages of keeping it in an IRA. And you will have to pay taxes on the amount delivered, unless it’s a Roth IRA.
But God forbid in the event of an emergency you would like to have some of your gold and silver coins shipped to you. Well, with a precious metal IRA you can.
Long Term Wealth Preservation
Over the last two decades, gold has outperformed many other asset classes, including stocks and bonds. In fact, from 2000 to 2020, gold increased by over 500% while the S&P 500 increased by only 190%.
Take Delivery of Metals to Comply With Required Minimum Distributions
Another advantage of gold IRAs is in-kind distributions. If you’re 72.5 and have to take RMDs, you can take them in the form of precious metal.
This allows you to maintain your precious metals position and continue benefiting from their potential growth and stability.
If you have a Roth IRA you’re exempt from taking RMDs which is one of the big tax advantages.
Cons or Disadvantages of a Gold IRA
While gold IRAs offers many benefits, there are also some drawbacks to be aware of. Let’s look at each one in more detail as we cover the cons of gold IRA investments in detail.
Higher Fees Than a Traditional IRA
Gold IRAs can have higher fees than a traditional IRA. This will typically include account setup fees of $50. An annual custodial fee of $100. A transaction fee of $75 when you buy or sell. And a storage and insurance fee of $100. (See our Gold IRA Costs page for a complete fee breakdown.)
You Can’t Personally Store Your Precious Metals
With a gold IRA, you are not allowed to store your precious metals yourself. They must be stored in an IRS-approved depository.
Receive No Interest or Dividends
Gold IRAs do not pay interest or dividends. Unlike a traditional IRA that typically invests in stocks or bonds. This means that your returns are limited to the appreciation of the value of your physical gold and other precious metals.
Gold IRAs Can Be Potentially Volatile
While gold usually increases with inflation there have been times of volatility. For example in September of 2009 gold reached $1900 per ounce. It then declined for several years and did not fully recover until July of 2020.
If you had bought before the decline you would have had to wait almost 11 years to make a profit. The U.S had very low inflation during this period. Currently US and worldwide inflation is at 40 year highs.
Avoiding Scams and Fraud
Below is an explanation of the most common scams you will come across when researching a traditional gold IRA. If a company you’re considering uses one or more of these promotions you would be wise to call our staff at once.
- Best Gold IRA Company Reviews – The search engines are flooded with “review sites” that have supposedly evaluated the ‘Best Gold IRA Companies”. But beware, these seemingly “independent” sites are paid by the gold firms they recommend. That’s right, they’re paid a commission if you set up your account with the company they referred you to. And according to their own websites, that may range anywhere from 3-6% of the gross value of the IRA accounts.
- FREE Gold and Silver Promotions – If a company tries to entice you to use them by offering you “FREE” gold or silver, watch out. Because first off, it’s not free and second, you’re paying for it. That amount comes directly out of your retirement savings account.
- Celebrity Endorsements – Don’t choose a company just because they have a famous conservative spokesperson that you like. These endorsements are expensive. And again, who do you think is paying for that contract? You are.
- Zero Fees Gold IRAs – There is no such thing as “Zero Fee” Gold IRAs. All custodians charge fees for their services. Make no mistake about it, you’re paying the fees. Either up front to the custodian or by overpaying for your gold coins so your gold dealer can cover the costs but tell you they’re free.
- “Exclusive” or “Premium” Coins – If you buy so-called “Exclusive” or “Premium” coins you’re going to overpay. These coins are not collectible and are normally worth very close to the spot price. But you can end up paying between a 33 – 66% spread. That’s a big deficit to have to overcome right out of the gate. Stay away from dealers that promote these coins.
Working With A Gold IRA Company In La La Land Is Usually A Con
Precious metals dealers in Los Angeles typically have big advertising budgets and generally charge a lot more for their products. This allows them to cover the cost of celebrity endorsements and tricky free giveaway promotions. The customer always ends up paying a lot more for the metals in their gold IRA. To avoid being a victim always read the “7 Gold IRA Blunders Report” published by the Certified Gold Exchange. To get your free copy call 800-300-0715 now.
Is a Gold IRA Right for Me?
Deciding if a gold IRA is right for you ultimately depends on what you’re looking to accomplish. Your financial goals should be the primary factor in determining if a gold IRA is the right fit for you. Consider your retirement planning goals and how a gold IRA can help you reach them.
Personal Financial Goals
When determining whether to set up a gold IRA or not, think about your overall financial goals. Are you looking for portfolio diversification, how to protect against inflation, and to create long-term wealth? Or all of the above?
A gold IRA can help achieve these objectives by providing a stable, proven, asset within your retirement portfolio that historically performs very well in inflationary environments.
Risk Tolerance
How much risk you’re willing to take is important to consider when deciding if a gold IRA is right for you. Gold and other precious metals can help balance out riskier investments in your portfolio. Often providing stability and growth during stock market fluctuations and economic downturns.
Investment Time Horizon
Your investment time horizon is important in determining whether a physical gold IRA is right for you. Gold IRAs may be more appropriate for investors with a longer investment horizon.
If you have a shorter investment horizon, a gold ETF may be more appropriate for you. With an ETF you can easily buy and sell in a traditional IRA brokerage account. Granted, you don’t own any physical gold but there are typically less fees and you’ll still have exposure to gold prices.
Once you’ve determined that a gold backed IRA account is a good fit for you, it’s crucial to choose the right provider. This single step will have the biggest impact on your success.
In the following sections, we’ll cover how to assess gold IRA companies and protect yourself from scams and fraud.
Evaluating Gold IRA Companies
When selecting a gold IRA company, it’s essential to choose a firm with a stellar reputation. But you’ll have to look a bit deeper than an A+ rating. It’s important to read the complaints a company has had lodged against them. This will give you an idea of what other peoples experience was working with that company. Ideally you want a company with a long term track record and zero complaints like the Certified Gold Exchange.
Additionally, you’ll want to read the gold IRA dealers contract and confirm what they’re going to charge you. This is called the buy/sell spread. Many Southern California gold companies charge between 33% -66%. The last thing you want is to lose a huge chunk of the value of your individual retirement account because you chose an overpriced dealer. Be sure to read about our “Price Match Plus Guarantee Here”.
Why Should I Start a Gold IRA Right Now?
Searches for “How to Buy Gold” are at all time highs right now. The U.S. national debt is a staggering $31,000,000,000,000 and counting. Inflation is at 40 year highs. The “Everything Bubble” has to pop at some point. How much longer do we have? No one really knows.
Gold and silver have historically performed very well during inflationary times. In the 70s when the U.S. ditched the gold standard, gold increased by 2,400% and silver 3,500%.
How high will precious metals IRAs go during this next crisis? God only knows. But right now is a great time to start a traditional gold IRA due to the current market conditions. By investing in a gold IRA, you can take advantage of the growth and stability offered by precious metals along with the tax benefits. All while protecting your retirement portfolio from rampant inflation and the coming economic turmoil.
Frequently Asked Gold IRA Pros and Cons Questions
We’ve covered a lot of ground so far, but you may still have questions about gold IRAs. Next we’ll address some gold IRA FAQs.
What types of Gold IRAs are available?
Gold backed IRA accounts can be either traditional or Roth IRAs.
What types of gold, silver, platinum and palladium can I hold in my IRA account?
Below are the purity requirements according to the Taxpayer Relief Act of 1997.
- Gold coins and gold bars must be 99.5% pure
- Silver coins and bars must be 99.9% pure
- Platinum and Palladium coins and bars must be 99.95% pure
- Bullion coins must be in perfect Brilliant Uncirculated (BU) condition
- U.S. Proof Coins must be in perfect condition, in original packaging with Certificate of Authenticity
- All coins and bars must meet accredited by an approved manufacturer, assayer or refiner
How much does a gold IRA cost?
Overall, gold IRAs can cost up to $320 to start. This typically includes an account setup fee of $50. A transaction fee of between $30 and $75. And an annual custodial fee of close to $100.
There are two different storage and insurance fee options. The first is a flat rate, normally $100 per year. The second is a sliding scale based on the value of your precious metals. (Visit our Gold IRA Rollover page for the two custodians that offer a flat storage rate.)
Where are my precious metals stored?
Gold IRAs must be stored at an IRS approved depository. Depending on the custodian you choose, we have storage options in Delaware, Texas, Los Angeles, Nevada and Salt Lake City. (Click here for an in depth write up of each depository.)
Summary
Bottom line, gold IRAs can be attractive if you’re looking to diversify your retirement accounts, protect against inflation, and create long-term wealth.
While there are some slight disadvantages to gold backed IRAs, the benefits outweigh these drawbacks for many investors. By carefully evaluating your financial goals, risk tolerance, and investment time horizon, you can determine if investing in gold is right for you.
Call the Certified Gold Exchange retirement team today at 800-300-0715 and determine if a gold IRA is right for you. We’ll help you make sense of all the gold IRA pros and cons.
Written by Gold IRA Experts Pat Collins and John Halloran
Avoid These 10 Gold IRA Scams.
DEALERS USE ON YOU
