How Much Money Do I Need to Start a Gold IRA?

More and more Americans are working hard to try to safeguard their hard-earned retirement savings. With 401(k) and IRA accounts holding trillions of dollars of accumulated savings and investments, it’s no wonder that American workers don’t want to see those assets lose value. But protecting those assets is sometimes easier said than done.

Fortunately there are options available today to protect retirement savings in tax-advantaged accounts, even if your current retirement plan doesn’t offer the most appealing options. One way to help protect yourself is with a gold IRA, a form of self-directed IRA that owns gold coins or bars.

But while a gold IRA sounds appealing to many people, it isn’t a concept with which many people are familiar, which of course leads to many questions about a gold IRA and how it works. And one of the most important questions many people have is how much money they need to start a gold IRA.

What Is a Gold IRA?

If you’re not already familiar with a gold IRA, all it is is an IRA account that owns physical gold coins or bars. If you already have an IRA account, you most likely own financial assets like stocks, bonds, or shares in funds.

Those are intangible assets with no physical backing. A gold IRA, by contrast, owns actual physical gold coins or bars that are managed by an IRA custodian and stored in a bullion depository. And when it comes time to take a distribution, you can choose to take it either in cash or in gold.

How Does a Gold IRA Work?

A gold IRA isn’t that much different than any other IRA account. It is subject to all the same laws and regulations as any other IRA account, with a few special rules that gold owners need to be aware of.

Like any other IRA account, the assets in your gold IRA have to be managed by an IRA custodian. Most IRA custodians don’t handle gold, precious metals, or commodities, for a variety of reasons. But there are a handful of reputable and experienced IRA custodians who manage gold and precious metals for their customers.

When you work with a trusted partner like Goldco, we can help you find IRA custodians to manage your gold IRA assets and bullion depositories to store those assets. The custodians and depositories we work with have significant experience in managing gold assets, ensuring that your gold remains safe and secure.

Once you have started your gold IRA, you’ll have to fund it. The most common method of funding is through a rollover from existing retirement accounts such as a 401(k), 403(b), TSP, IRA, or similar account.

Once your account is funded, you decide which gold coins or bars you want to buy. You’ll have to remain aware of the fact that a gold IRA, like any other IRA, cannot purchase collectibles. So those Swiss 20 Franc coins you may have had your eye on aren’t going to cut it. Using IRA assets to purchase coins that are considered collectibles is treated as a distribution and can subject you to taxes and penalties.

There are numerous gold coins that aren’t considered collectibles for IRA purposes, however. These include Gold American Eagles and any coin with a minimum fineness of .995 (99.5% gold). Goldco works with mints around the world to bring you IRA-eligible gold coins so that you don’t have to do the work of figuring out if the coins you want are IRA-eligible or not.

Once you own gold in your gold IRA, you’ll be subject to all the same distribution requirements as any other IRA account. Any distribution before age 59½ may be subject to taxes and penalties, and required minimum distributions (RMDs) will start at age 73. Any distributions you take are taxed just as with distributions from any other Traditional IRA.

Of course, you can also start a Roth gold IRA, either through a Roth conversion or through a rollover from an existing Roth account. In that case, the same rules apply to your Roth gold IRA as to any other Roth IRA, including no RMDs and no taxation on your distributions.

Funding a Gold IRA

There are two ways to fund a gold IRA. You can either start one from scratch and fund it with annual contributions or you can roll over funds from existing tax-advantaged retirement accounts into a gold IRA. For a number of reasons, the latter is the preferred method for most people.

If you start a gold IRA from scratch and fund it with annual contributions, you’ll be limited to the maximum amount of annual IRA contributions, which is $6,500 in 2023, or $7,500 for those over age 50. If that seems like a small amount, that’s because it is. Compare that to a 401(k), to which you can contribute up to $22,500 in 2023, or $30,000 if you’re over age 50.

Not only can that make it difficult to build up a substantial nest egg, it can also subject you to high fees. Let’s explain.

Because a gold IRA has to store its assets in an approved depository, you’re going to pay fees for that storage. In general, you can expect to pay about $200-300 a year in combined account maintenance fees and storage fees.

At $6,500 in contributions, $300 is equal to a 4.6% fee, which is pretty high. Compare that to many investment funds that have annual fees in the 0.20-0.30% range.

That’s why so many people decide to roll over assets from existing accounts into a gold IRA. If you do a $100,000 rollover, for instance, that $300 in fees comes out to an 0.30% expense ratio, which isn’t too bad. And the more you roll over, the lower in percentage terms that fee becomes.

So the answer to “how much money do I need to start a gold IRA” is “it depends.” You really don’t need much to start a gold IRA in theory, just earned income to contribute to an IRA and enough money to buy gold. But because the fees could be prohibitively costly, that might not make much financial sense.

At Goldco, we normally require a minimum amount of $25,000 to start a gold IRA, in order to minimize your expense ratio from fees. And because we don’t want our customers to allocate more than 50% of their savings to gold, that means that you’ll need to have a minimum of $50,000 in tax-advantaged accounts in order to work with us to start your gold IRA.

So while in theory you could start a gold IRA with nearly nothing, the short answer is that you’re probably going to want to have at least $50,000 in tax-advantaged accounts before thinking about starting a gold IRA.

What If I Don’t Have Enough Money to Start a Gold IRA?

If you don’t have enough money to make starting a gold IRA worth your while, or if you don’t want to start a gold IRA because you would rather hold your gold in your own two hands, Goldco is more than willing to work with you. We have direct cash purchase options available for all of our customers, and we can work with you to deliver your coins to your door, or above certain thresholds we can even help arrange storage for you.

We understand the many benefits of owning gold, and we want as many of our customers as possible to enjoy those benefits, regardless of whether or not they own their gold through a gold IRA. Goldco’s representatives are happy to speak to you about all the gold purchase options available to you.

In these uncertain times, with recession seemingly around the corner and the prospect of another financial crisis looming large, gold could play an important role in preserving and protecting the wealth of millions of Americans.

Many have already made the decision to protect their financial well-being with gold. Will you?

Call Goldco today to learn more about how you can benefit from owning gold.