A Gold IRA is a special retirement account that allows you to invest in gold bullion and coins
A Gold IRA is a type of individual retirement account that allows investors to hold physical gold or other precious metals, unlike standard IRAs.
To hold gold in an IRA, you need to create a self-directed account, administered by a specialist custodian who handles and stores the metal.
While convenient, keeping gold in an IRA carries high fees and doesn't take full advantage of IRA tax benefits.
Ah, the glittering appeal of gold: a tangible, durable asset that traditionally keeps or increases its value during inflation, political upheavals, and cratering stock markets. Even if they don't think such calamities are on the horizon, many investors who want to diversify their individual retirement accounts (IRAs) beyond the usual suspects — stocks, bonds, and mutual funds — might want a stake in the physical yellow stuff.
In fact, gold is one of the few commodities that the IRS allows IRAs to invest in. But before you go on a bullion buying spree, you should understand the ins and outs of a Gold IRA.
What is a Gold IRA?
If you want to hold physical gold in an IRA, it can't be your regular account. It has to be a separate, special one, called a Gold IRA.
Also known as a precious metal IRA, a Gold IRA works pretty much like a standard individual retirement account: the same contribution limits and distribution rules. However, instead of holding paper assets like stocks and bonds, the Gold IRA is earmarked for holding physical bullion — that is, coins or bars of gold and other approved precious metals, including silver, platinum, and palladium.
Gold IRAs can also contain gold stocks (shares of gold mining/production companies), gold mutual funds that invest in bullion or stocks (or both), and gold ETFs that track gold indexes.
Pros of Gold IRAs
As with any investments, there are pros and cons to Gold IRAs. Some of the advantages include:
Tax benefits. Gold IRAs offer some of the same special tax treatment as standard IRAs: Contributions made to traditional self-directed IRAs are tax-deductible. And qualified withdrawals from Roth accounts are tax-free.
Long-term hold. Physical gold isn't very liquid, but then neither are IRA holdings. Given that it's a long-term, buy-and-hold sort of investment, gold is well-suited to an IRA, whose assets you often don't touch for decades – usually until you retire.
Greater control. Gold IRAs are always self-directed, which means you directly manage your holdings and make all the investment decisions.