What is a Gold IRA?
A Gold IRA (or Precious Metals IRA) is a self-directed Individual Retirement Account that has become incredibly popular in recent years, particularly among those who value diversity and stability in their investment portfolio. This financial instrument gives investors the ability to add physical precious metals, in the form of coins and bars, to their tax-sheltered retirement accounts. Precious metals, which have long been considered a classic hedge against inflation and geopolitical crisis, are ideally suited to create diversification away from paper assets for the long term investor.
The primary objective of virtually all Gold IRA investors is long-term preservation of wealth – and a precious metals IRA is a safe, stable, and powerful vehicle for maintaining long-term asset growth. To further maximize the safety and security of your investment, all physical precious metals are kept in an IRS-approved depository until the owner reaches retirement – at which point they can be shipped directly to you, or easily converted to cash. Also, keep in mind that transferring or rolling over your existing retirement account is a tax-free transaction.
Why should you consider Gold for your IRA?
As an asset class, precious metals offer a number of benefits over other common investment choices. Gold’s benefits include a history of financial stability during economic downturns, better insulation from currency devaluations, and a fixed supply that can’t be changed in the foreseeable future. Read below for more information about how gold compares to some other popular investment classes.
Gold vs. the Stock Market: When it comes to retirement planning, the name of the game is risk versus reward. After all, the most important retirement goal is ensuring that your hard-earned money is preserved and available to you when you stop working. Smart investors, with the future in mind, partner with us when they want to protect their retirement funds from the volatility of the stock market, and diversifying your portfolio with precious metals is key in achieving that peace of mind. Keep a portion of your money out of the stock market by investing in a powerful and stable option – precious metals.
Gold vs. the U.S. Dollar: Many investors today are alarmed at how quickly the dollar is losing purchasing power due to inflation and the government’s Quantitative Easing (QE) programs. The consumer goods we buy on a day-to-day basis, such as food, clothing, and gasoline, require a greater number of dollars each year to buy. That means that even while your money is safe in the bank or other interest-earning account, its purchasing power is constantly being reduced as the government dilutes its value through the printing of additional money. While most investment vehicles are in one way or another tied to fiat currency (meaning they are subject to the same fluctuations in value as everyday goods) gold has long been considered a powerful hedge against inflation and a means to protect – even improve – purchasing power over time.
Gold vs. the National Debt: The national debt is massive, and only expected to keep on growing. At current levels many believe the national debt has become unstable and unmanageable, which has historically resulted in panic setting into the market in many global theaters. Physical assets like gold are considered by many to be immune to most market cycles and are a hedge against market uncertainty – crucial when protecting your retirement plan.
History of the Gold IRA
Although traditional IRAs were introduced in 1974 by the Employee Retirement Income Security Act, Gold IRAs didn’t come until decades later.
The era of precious metal IRAs was ushered in by the Taxpayer Relief Act of 1997. As a consequence of this Act, the IRS expanded the IRA-allowable precious metal holdings to include 1, ½, ¼, or one-tenth ounce U.S. gold coins and one-ounce silver coins minted by the U.S. Treasury Department, palladium, and platinum.
Note that the IRS demands metals meet a minimum purity requirement for any of these metals to be IRA-approved.
- Gold must be 99.5% pure
- Silver must be 99.9% pure
- And Platinum and Palladium must be 99.95% pure
Types of Gold IRAs
There are three types of Gold IRAs, and each one is essentially the Gold IRA corollary of the traditional IRA.
- Traditional Gold IRAs: This type of Gold IRA is the most common. Here, you can fund your retirement account with pre-tax dollars. In other words, your earnings grow on a tax-deferred basis, and you won’t pay taxes until you retire and withdraw your investments.
- Roth Gold IRAs: Roth Gold IRAs are the inverse of the traditional Gold IRAs in that your contributions to this account are made on an after-tax basis. You get an up-front tax break, but your withdrawals are tax-free.
- SEP Gold IRAs: SEP Gold IRAs are designed for self-employed individuals and employees of small businesses. Contributions to this account are made on a pre-tax basis, and withdrawals are taxed at requirement.
How does a Gold IRA Work?
We’ve already established that a Gold IRA is a self-directed IRA that allows you to invest in gold and other IRS-approved precious metals. To help you better understand how the Gold IRA investment process works, here are simple steps to start investing in a Gold IRA
3 Steps to Start Investing in a Gold IRA
Step #1: Choose your custodian
According to the precious metals IRA rules, investors must not add gold or other precious metals to their IRA by themselves. Instead, they must work with a custodian and an approved depository.
“Custodian” here refers to the IRS-approved financial institution you choose to work with. This company will help you open your self-directed IRA account, fund your account, buy the precious metals and protect the assets in your Gold IRA.
Note that, according to IRS rules, you must never have physical possession of your IRA-purchased precious metals. Consequently, custodians typically work with IRS-approved depositories to help protect your asset.
Step #2: Fund Your Account
You can fund your account in one of two ways:
- Cash Transfers: You can fund your Gold IRA account in the same way you would fund a typical savings or investment account— using cash, cheques, or wired transfers.
Then, you can use the money to buy your precious metals. This cash transfer option is the easiest way for you to fund your IRA account.
Note that the IRA sets the contribution limit annually. For 2022, you’re allowed to contribute $6,000 to your IRA (or $7,000 if you’re age 50 or older).
- Rollover previously held assets: If you own any assets such as stock, bonds, or other securities in another IRA, you can transfer them to your new Gold IRA.
Also, if you have a 401(k), 403(b), or some other retirement account, you can roll the funds in that account into your new Gold IRA. Then, you can use the new assets to buy your precious metals.
Step #3: Choose Your Metals
Once you’ve funded your account, you can go on to buy any of the IRA-approved metal(s).
The Pros and Cons of Gold IRAs
Every investment has its advantages and disadvantages. And Gold IRAs are no different. Therefore, familiarizing yourself with the possible upsides and downsides will enable you to make smart investment decisions.
- Protection against Economic Crashes
As an asset class, gold and other precious metals are sought after because they are considered a good hedge against inflation. And there’s a good reason why that is.
Stocks and bonds crash in times of major economic disruptions. Dollar notes can easily be printed, leading to devaluation. Gold, however, has a historically negative correlation with these aforestated investment classes— stock prices go down during financial crises, whereas gold prices go up. What’s more, gold tends to hold its value in the long run.
Gold is valuable for two primary reasons: It’s (a) a rare metal with real utility, thanks to its lustrous and metallic qualities, and (b) a finite resource.
Yes, there are still several thousand tons of unmined gold left beneath the earth’s surface. However, gold mining is expensive and sometimes uneconomical. Also, the mining process isn’t environmentally friendly.
For these reasons, investors continue to look to gold as a relatively safe investment option and protection against risk.
- Tax Advantages
Like Traditional individual retirement accounts, Gold IRAs offer specific tax incentives. You enjoy tax-deferred growth with the traditional Gold IRA. And you enjoy tax-free growth with the Roth Gold IRA
- Greater Freedom
Gold IRAs are a type of self-directed IRA, which means you’re in complete control of your investment decisions, and you have greater freedom on the types of investment you hold in your account.
- No Tax-Advantaged Income
Tax-advantaged income is one of the primary advantages of standard IRAs. However, Gold IRA investors do not enjoy this benefit since gold doesn’t pay yields, dividends, or interests. Your gains come solely from selling gold at a higher price than you bought it.
- High Holding Costs
There’s no denying that precious metals have significantly higher holding costs than stocks and bonds. For one, you may have to pay storage costs to ensure the safety of your asset, which isn’t necessary for paper assets. Also, the custodial fees for Gold IRA tend to be higher than the fees for traditional IRAs.
- Risk of Theft
Gold is a hard asset—it’s physical—as such, it can be stolen. However, these risks are mitigated because the IRS requires that depositories are insured.
American Bullion uses an IRS-approved Delaware Depository. Delaware Depository is a renowned site that carries a $1 billion all-risk insurance policy through Lloyd’s of London. And uses state-of-the-art surveillance systems and tight security personnel to ensure the safety of your assets.
The bottom line is that Gold is a relatively low-risk, low-reward investment asset. But then, that’s one of the reasons it’s a safe haven.
If you want an asset with the highest potential for financial returns, then precious metals aren’t it. But if you want to diversify your investment portfolio to include assets that smooth out risk and preserve wealth, consider investing in Gold IRAs.
Experience A “Hassle-Free” Gold IRA Transfer
As a pioneer in Gold IRA Industry, our goal at American Bullion is simple – to make access to this fantastic financial vehicle for Individual Retirement Accounts a simple and hassle-free process. Our experienced team of professionals is well versed in all of the common pitfalls and penalties associated with shifting your retirement savings, as well as the questions and concerns that investors have. We will empower you to make an informed decision, and take control of your future.
If you currently have an IRA, you can move some (or all) of it to your new self-directed Gold IRA using a process known as a direct transfer. Once you’ve made your decision to complete the transfer, one of our Precious Metals Specialists will expertly guide you through the process step-by-step, to make the transfer quick, easy, and ensure that your retirement account is fully compliant with federal regulations.
Common Questions & Facts on Gold IRA Investments
Our qualified experts speak to many concerned individuals each day, many of whom have similar questions about the rules governing their retirement accounts. Read below to learn more.
There are a variety of retirement accounts which are eligible for this type of conversion – however, ideal accounts include: Traditional, Roth, SEP, or Simple IRAs. Non-IRA accounts can also be converted to gold, accounts that may be eligible for a rollover include: 401(k), 403(b), 457(b) Deferred Compensation Plan, Pension Plan, Thrift Savings Plan, TIAA CREF, Non-Prototype IRA, and Beneficiary IRA. Consult with one of our helpful advisors for more information.
If you have any questions about the eligibility of your retirement plan, our qualified experts are just a call away.
Beginning in 1998, the IRS granted investors the opportunity to hold a wide range of precious metal coins and bars within individual IRA accounts. Since then, countless investors and everyday citizens have taken advantage of the tax reductions, and portfolio stability that this type of qualified account can offer. Today, Self-Directed IRAs can hold gold, silver, platinum, and palladium bullion coins, as well as American Eagle proof coins. Also, bars that meet certain minimum fineness requirements are allowed.
Due to the importance of keeping your retirement savings secure, there are stringent requirements for the quality and reliability of coins being included in this IRS-qualified IRA. The United States government only allows certain coins and bullion bar types to be placed in a Gold IRA account. This primarily precludes coins minted by some foreign countries or NGOs, however, there are some exceptions. In addition to common bullion and coins, proof coins have also become an increasingly popular choice for this retirement instrument. These coins are bought and sold with much higher premiums than regular bullion coins because they carry both collectible and bullion coin value due to their extreme quality and rarity.
Some of the most common IRA-permissible coins are:
- American Gold Eagle Bullion Coin
- Proof Gold American Eagle Coin
- Canadian Gold Maple Leaf Coin
- Canadian Silver Maple Leaf Coin
- American Gold Buffalo Coin
- Austrian Philharmonic Gold Coin
For a full list of IRA permissible coins and bars, contact an American Bullion precious metals specialist at 1-800-326-9598.
Gold is traditionally viewed as a long-term investment. Investors should plan on maintaining a Gold IRA account long enough to allow it to grow in value and outpace inflation. Therefore, commonly known, the minimum holding period for gold and other precious metals recommended being at least 5 to 10 years or longer.
American Bullion uses IRS approved Delaware Depository – a renowned site that carries a $1 billion all-risk insurance policy through Lloyd’s of London. This location uses state-of-the-art inventory control and reporting systems, dedicated security staff, and video recording of all activity around the clock. You can physically view your investment at any time, and the location is located far from major political and financial centers to minimize risk.
Some providers within the Gold IRA industry have been heavily advertising “home delivery” IRA accounts. While storing your gold at home can seem appealing at first glance, there are a number of stringent IRS requirements for this type of account. Click here to learn more about home storage Gold IRAs.
One of the great benefits of utilizing this instrument is that when you take a distribution, you can either take physical possession of your metals or liquidate them and take the cash value – the choice is yours. Liquidation is a quick and simple process, and we can provide easy instructions to help. Contact us directly for more information.
American Bullion is the pioneer and a trusted leader in Gold IRA retirement accounts. Clients benefit from our in-house IRA Processing Department that handles the entire IRA process – from initial funding to subsequent disbursements. We also have a team of experts that can provide you with the facts needed to make an informed decision with the ownership of your precious metals.
Call 1-800-326-9598 for a complimentary, no-obligation consultation with a Gold IRA specialist and learn how to create a gold or silver IRA today.
Request your Free Gold Guide
Consult the complementary American Bullion Gold IRA Guide that brings information and visuals together to educate you on owning gold and other precious metals. You’ll find tips, such as how to buy precious metals, which metals are allowed in specific IRAs, how to liquidate your metals, global factors that impact the precious metals market, and more. The Gold IRA Guide will show you why gold has remained popular for thousands of years. Safeguard your future with this unique investment tool from American Bullion – take the first step by requesting your Free Gold IRA Guide today.