Is Buying Gold a Good Retirement Plan?
With the recent unease in financial markets, more and more Americans are looking for safety when it comes to their financial assets The weakness in the banking system has many people scared and...
Gold has a mystique about it, an aura, that really can’t be explained. The sight of gold coins, gold jewelry, or gold bars can lead even the most virtuous goody two shoes into greed and avarice. That can be a problem, especially if you own gold and other people know it.
While owning gold can offer numerous benefits, in a way it can be a bit like Damocles’ sword. You always have to wonder where your gold is, who knows about it, and how securely it’s being stored. Thankfully, with the right storage options, you can minimize the amount of worrying you have to do about your gold holdings.
Questions about gold storage crop up especially when it comes to buying gold through a gold IRA. Thankfully, knowing where you can store your gold IRA is a relatively easy question to answer.
If you’re not already familiar with a gold IRA, it’s just an IRA account that owns and holds physical gold coins or bars. Whereas most IRA accounts hold stocks, bonds, shares in funds, and other intangible assets, a gold IRA is a type of self-directed IRA that allows you to invest in tangible, physical precious metals.
There are numerous potential benefits that can come from owning a gold IRA. Here are four of the most important ones.
Perhaps first and foremost among the benefits of a gold IRA is portfolio diversification. Because so many IRA and 401(k) accounts are limited in their asset choices or invest solely in stocks, bonds, and similar financial assets, there can be a tendency towards a lack of diversification.
With a gold IRA, you can help diversify your portfolio by owning physical assets. Gold also tends to perform well when markets aren’t, which can help alter the risk profile of your portfolio and minimize your exposure to economic downturns.
Gold is a popular safe haven when the economy turns south, and has served as a safe haven asset for centuries. If you read stories of the Weimar hyperinflation and the economic damage that resulted, the lesson learned is that those who held precious metals, or foreign currencies that could be exchanged for gold or silver, were among those who came through the crisis in the best shape.
When paper currencies become worthless, when companies go bankrupt, and when economies falter, gold in the vault sits there as the ultimate and final source of value when it seems like everything else has come crashing down.
Gold has also traditionally been treated as a hedge against inflation. Because gold tends to grow in value and maintain its purchasing power over time, it is trusted as an asset that will help preserve wealth during times of high inflation.
During the stagflation of the 1970s, for instance, gold’s annualized rate of growth was over 30% per year over the course of the decade. And since 1913, the US dollar has lost 97% of its purchasing power while gold has gained over 9,000% in value.
Finally, one of the major advantages of a gold IRA is its favorable tax treatment. With a Traditional gold IRA you can buy gold with pre-tax dollars, pay no taxes on your gains, and only pay regular income taxes (instead of collectibles taxes) when you take a distribution.
With a Roth gold IRA, you would buy gold with post-tax dollars, pay no taxes on your gains, and pay no taxes when you take a distribution. And you can fund your gold IRA with a tax-free rollover or transfer from your existing retirement accounts, such as a 401(k), 403(b), TSP, IRA, or similar account.
A gold IRA is subject to all the same rules and regulations as any other IRA account. One of the most important ones for you to know and be aware of is the ban on ownership of collectibles.
No IRA account is allowed to own collectibles, which includes alcohol, paintings, rugs, but also coins and metals. However there is an exception made for specific coins and bullion.
The US Mint’s Gold American Eagles and Silver American Eagles are specifically exempt from the definition of collectibles, as are any coins or bullion that meet the fineness standards set for futures markets. In the case of gold, this means that any coin or bar with a minimum fineness of .995 (99.5% pure gold) is not considered a collectible for purposes of IRA ownership.
Gold IRAs are also subject to the same distribution rules as other IRA accounts. For Traditional IRAs this means that any distributions taken before age 59½ could incur a 10% penalty in addition to any taxes owed. And at age 73 you’ll be required to start taking required minimum distributions (RMDs).
For a Roth gold IRA, you can withdraw your contributions at any time, but earnings cannot be withdrawn until you turn 59½ and have had your account for five years, otherwise you will owe taxes on them. There are no RMDs with a Roth gold IRA, and once you reach age 59½ you can start taking distributions tax-free.
Then there are the maximum contribution limits for IRAs, which apply to a gold IRA as well. The maximum contribution for 2023 is $6,500, or $7,500 if you’re over age 50. If you think that seems a little too low to build up retirement savings, you’re right. But there’s a way around that.
Rollovers or transfers into an IRA account from another retirement account, such as a 401(k), 403(b), TSP, IRA, or similar account are not subject to that annual contribution limit. So if you have an orphaned 401(k) account at a previous employer, or a 401(k) plan with limited investment options, or an IRA account that you want to diversify, you can move assets from those accounts into a gold IRA tax-free and won’t be subject to those annual contribution limits.
All IRA assets must be managed by a custodian. It doesn’t matter whether you have an IRA through your bank, through a brokerage like Charles Schwab, or if you start a self-directed IRA through a custodian that specializes in precious metals. All IRA assets must be managed by a custodian.
If you’ve been researching gold IRAs you’ve probably come across something called a home storage IRA or a checkbook IRA. It’s an arrangement that claims to allow you to start a gold IRA and store your IRA assets at home. If it sounds too good to be true, that’s because it is.
There is a procedure for becoming a non-bank trustee or custodian, and IRS lists the qualifications on its website. They’re pretty daunting, and include a requirement of fiduciary experience and financial responsibility, a net worth of at least $250,000, and a requirement that all employees taking part in fiduciary duties be bonded at a minimum of $250,000.
Sure, if you’re a multi-millionaire with significant experience in the financial services industry, you might be able to apply and be approved as a non-bank trustee or custodian. But that’s not 99.9999% of people out there, let alone those looking at a gold IRA.
If you try to start a home storage gold IRA and get caught by the IRS, you’re looking at paying not only income taxes but also significant penalties, including possibly interest on the taxes the IRS says you should have paid. It’s happened before to people who tried to go that route, and the results weren’t pretty.
That’s why you’ll need to have your gold IRA assets managed by a custodian, and one who has experience with precious metals. Not all IRA custodians will manage precious metals assets, so you’ll either have to do your homework or work with trusted partners like Goldco, which has established relationships with numerous gold IRA custodians.
Your gold IRA custodian will take care of managing your gold IRA assets and ensuring that your account is taken care of. But any gold IRA assets you have will have to be stored with a bullion depository.
Goldco partners with bullion depositories such as the Delaware Depository to store our customers’ gold assets. Because gold IRA assets can’t be stored at home, and have to be managed by a custodian, it makes the most sense to store them with a bullion depository.
These depositories have years of experience dealing with the storage of precious metals, and store assets from thousands of individuals and entities. They take the utmost care to ensure that your gold IRA assets remain safe and secure, and can even offer numerous different levels of storage to make absolutely sure that nothing happens to your gold.
With a Goldco gold IRA, you can rest easy knowing that the gold you own is yours and is safely stored in a vault. And whenever you make the decision to take a distribution of that gold, whether you choose the distribution in cash or in physical gold, you don’t have to worry about that gold not being there. It’s there, keeping your wealth safe and secure.
Since Goldco offers direct cash sales of gold to those who don’t want to start a gold IRA, many of our non-IRA customers ask us about how they can store their gold. If you’re buying gold outside a gold IRA you have numerous options.
First and foremost is storing your gold at home. This is a popular storage option for those who think that “one in the hand is worth two in the bush” or “if you can’t touch it, you don’t really own it.” Of course, it brings with it the risk of theft, which is something you’ll want to consider and protect against.
Goldco has periodically offered promotions in which we offer free safes to our customers on certain qualifying orders. So be sure to ask your Goldco representative if any of those promotions are still available. Having a safe in which to store your gold can help with your peace of mind.
The next possible option is storing your gold in a safe deposit box. This can be at a bank or at a safe deposit box company. The downside to this is that you only have access to your gold during business hours. And with some recent government crackdowns on safe deposit box companies, you really have to do your due diligence to make sure that your assets remain safe.
Finally, you can also have your gold stored at a bullion depository. For small amounts of gold this doesn’t make much sense due to storage fees, but with larger amounts of gold it can be a viable and relatively inexpensive storage option. If you’re looking to buy a large amount of gold and want to have it stored at a bullion depository, discuss it with your Goldco representative to see what kinds of options are available to you.
If worries about where you can store your gold IRA have left you hesitant to start a gold IRA, worry no more. With your gold IRA assets stored in a bullion depository, you can rest assured that your gold is going to be there when you need it most.
And if you still have questions about where you can store your gold IRA, Goldco’s representatives are always available to help answer your questions. With over $1 billion in precious metals placements and thousands of satisfied customers, Goldco has helped numerous Americans safeguard their financial future with gold. Call Goldco today to find out how you can benefit from owning gold.
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