The retirement account advisers at Certified Gold Exchange have been reporting some confusion among investors as to exactly what constitutes a Gold IRA. There are numerous ways to invest in gold-based assets inside of one’s retirement account, but not all of these products are tantamount to an actual Gold IRA. For the benefit of our clients and readers we have decided to break down the two investments that are most often confused with an actual Gold IRA, as well as explain what makes a true Gold IRA different from other types of “gold” investments that can be held within retirement accounts. Individuals with specific questions about their own retirement accounts are encouraged to call us toll-free at (800) 300-0715, where one of our helpful IRA specialists can provide you with free research materials that will best fit your needs.
What is a gold mining stock IRA?
Companies like Barrick Gold, Goldcorp and Newmont Mining allow investors to buy shares of their respective companies for placement within retirement accounts. These shares represent ownership of the company itself rather than ownership of physical gold. The profits and dividends from gold mining stocks are irrelevant to gold spot price fluctuations and instead are based on the company’s performance, output, leadership changes, news and rumors. One of the biggest difference between a Gold IRA and a stock IRA is the fact that stock-based IRAs can pay dividends.
What is a gold ETF IRA?
A gold exchange-traded fund (ETF) is, for all intents and purposes, a pooled account which allows investors to “own” gold without ever taking physical delivery of said gold. Popular ETFs include ProShares Ultra Gold (UGL), SPDR Gold Shares (GLD) and ETFS Physical Swiss Gold Shares (SGOL). Many investors’ main concern with gold ETF shares is that those shares may or may not be fully backed by real gold. The companies that operate these funds sometimes give the SEC difficulty when asked to prove that the amount of gold held is equal to the amount of shares sold. If a company was found to be holding less than the sold amount then shares would undoubtedly plummet. Also, since these companies have operating costs, profits may not always keep up with increases in the gold spot price.
What is a Gold IRA?
A real Gold IRA, also known as a Precious Metal IRA because it can hold silver and platinum, involves rolling over funds from a Roth, SEP or Traditional IRA. The chosen amount of funds are used to purchase actual bars and coins, and those metals are then stored in a government-monitored depository in Wilmington, DE. Investors may request home delivery of their gold at any time but will be required to pay capital gains taxes (if applicable) as well as an early withdraw penalty (if applicable). Precious metals must either be .999 pure, with the sole exception being the American Eagle bullion and Proof coins, which are of 22-karat purity. The investor’s custodian will send monthly or quarterly statements to confirm the volume of metals as well as the current market value of those metals. Investors can liquidate their precious metal holdings at any time, in which case an equal amount of cash will be placed into the investor’s IRA. The main differences between a Gold IRA and stock IRA are that with a Gold IRA:
a. the metals are physically allocated in the individual investor’s name, and
b. no profits or losses are realized until the investment is sold
As you can see, the differences between a Gold IRA and a stock IRA of any variety are many. If you are undecided as to which type of gold-based investment is right for you, call us today at (800) 300-0715 for an obligation-free portfolio analysis as well as a complimentary copy of Real Money Magazine, produced and distributed by Certified Gold Exchange, Inc.
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