Mitt Wilson

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Are gold IRAs a good idea?

Investing in precious metals certain has its advantages, and individual retirement accounts have incredible tax benefits when they’re used right.

How could you go wrong by enjoying the best of both these worlds at the same time?

Investing in gold is a great move if you believe in a diversified portfolio. This is an alternative asset class that tends to move in different directions than the stocks and bonds that might fill most of your portfolio. That’s important during market downturns or turmoil.

The hedge against inflation is proving to be a real benefit lately. We’re lucky in how we sometimes go decades between bouts of serious inflation, but having gold in these times really helps you preserve the value of your wealth. You’ll be in a stronger position once everything else settles down.

However, gold IRAs do have their limits and restrictions. High minimum investment levels, restrictions on what you can and can’t buy, storage limitations, and limited windows of opportunity to cash out and access your wealth are all potential downsides. If any of these apply to you, then a gold IRA might not be a good idea.

You have to honestly decide for yourself. However, I can make sure you make an informed decision.

Gold IRA Benefits and Advantages

a gold bar resting on some investment charts

When looking at gold IRAs and considering whether they’re a good idea or not, it’s best to break things down.

The two components of a gold IRA are the gold and the IRA, and I think it’s worth looking at each of them separately since they both bring something to the table.

I’ll cover both so you know everything you need.

Gold IRA Benefits

First, let’s cover the reasons why investing in gold is a good idea. There are plenty of these. As you’ll see, many of them can be quite powerful at times, but not all might apply to you.

  • Currency Comfort

When fiat currency goes down in value, gold usually doesn’t. Many financial experts advise you to put anywhere from three months to two years worth of living expenses in a rainy day fund, but you might actually lose value in that over time as the buying power goes down.

A money market fund or some certificates of deposit might maintain your spending power, but anything you save after that needs to be in investment assets that actually grow in value over time instead of going down or staying flat.

  • Diversification

Gold’s correlation to other primary asset classes is either low or even negative. That makes it great for portfolio diversification.

When everything else plummets in value, gold is going to hold its ground and possibly even go up. It’s almost like the opposite end of a see-saw so that you always have one side of your portfolio going up.

  • Gold Is Simple

It takes a professional to grade or identify a diamond. Pieces of art are forged all the time. Stocks and bonds have to be tracked in value 24/7 based on neverending news. Gold has a rare simplicity to it.

  • Gold Is Still Money

Gold’s not actively used as currency much, but it still plays a monetary role in many countries. Gold holds long-term value better than nearly any fiat currency on the planet. Nothing has stored long-term value better since 1900.

Some short-term currencies do better in certain periods, but they don’t hold up in the long term.

  • Gold Is Tangible

There are many different asset classes you can invest in. Gold is among the handful that is actually tangible. Hackers aren’t going to get inside your gold and steal it as they might do with crypto. You can lose real estate to a natural disaster, but gold will survive.

  • Gold Won’t Go Bankrupt

Holding gold doesn’t involve a paper contract. There are no middlemen or other parties to let you down by failing their contractual obligations. Stocks and bonds can crater in value and even become worthless, and even real estate can lose a lot of value overnight.

Gold does go up and down, but it always has some value you can rely on.

  • Hedging Against Inflation

Being an inflationary hedge is the usual reason for investing in gold. When inflation happens, currency values go down. Historically speaking, most primary currencies depreciate in value while gold values go up.

Gold prices shot up remarkably in the 1970s when stagflation hit everything else.

  • Liquidity

Most gold IRA brokers have buyback options where they will purchase gold you want to liquidate so you get cash fast. If you own physical gold yourself, you can take it to a local pawn shop, jeweler, or coin shop. You can liquidate it faster than cashing out stock shares.

Also, gold is something you can sell nearly anywhere in the world.

  • Productive When Quiet

Gold’s highlights might be strongest when there is serious economic turmoil, but it can actually be quite productive when it’s just sitting there and letting the years go by. It provides decent returns over the long haul. That reduces the overall risk in your portfolio but also generates wealth along the way.

  • Stability

Gold has the power to protect your other investments. It might even save your standard of living when there are market crashes and economic turmoil.

If you’re close to retirement and the rest of your assets crash in value, your gold reserves might leave you afloat until their prices return to normalcy.

This can keep you from having to delay the start of your retirement.

The Perks of Using an IRA Account

I’d be very concerned if at least some of the reasons why investing in gold is a good idea don’t appeal to you, but why do it in an IRA account specifically? These accounts can also be a good idea in their own right.

One of the biggest advantages of IRA accounts is the tax-free growth of any assets included within them. You won’t pay capital gains taxes until you take a distribution, and you can minimize those taxes by waiting until the right age or circumstances.

a woman puts a gold coin in a gold piggy bank

Granted, gold won’t generate dividends or yields, but the value can grow over time.

Another perk of IRA accounts for gold investing includes the option of choices. You can do a traditional gold IRA with any broker. However, you might also be able to do a Roth or even a SEP gold IRA under the right circumstances.

Traditional gold IRAs might be the most common. You can make pre-tax contributions, and those contributions might even be tax-deductible.

If you’re doing this out of your paycheck, then you’ll be limited to $5,500 per year when you’re not yet 50, but you can do $6,500 a year after that. Rollovers are different, but we’ll get to that in a moment.

The Roth gold IRA doesn’t have upfront tax deductions because you’d be using post-tax money that you pay income taxes on. However, the nice thing here is that you won’t deal with any taxes when you take retirement distributions later on.

SEP gold IRAs aren’t for everyone.

They’re designed for self-employed professionals and business owners. A SEP gold IRA works a lot like a traditional IRA with the exception of there being higher limits. Rather than getting capped at $5,500, you can either do $53,000 or 25% of your income, whichever amount happens to be lower [1].

The real power of IRAs is when you do a rollover.

That’s when you pull funds from a 401(k), 403(b), or even a previous IRA into a gold IRA. If you’ve amassed any significant wealth in a 401(k) or other employer sponsored account, then there might be serious benefits to doing a rollover.

For starters, many 401(k) plans have rather limited investment possibilities. In many cases, you get a select handful of mutual funds all from one provider. With a gold IRA, you can choose your broker from anyone in the industry.

Secondly, communication might be better. While some employers might let you keep a 401(k) active after you leave the company, you might also find yourself being treated like you’re second-class citizen as they prioritize current employees.

Just contacting administrators or keeping up with company communications can get harder and harder to do. However, most gold brokers are going to keep up with you about your account with them.

Many 401(k) plans have active administration or management. ETFs and index funds are less likely to have this, but anything managed by humans who choose the stocks and assets in the fund are going to have administrative costs that are usually several percentage points of the total value, and you’ll get hit with them every year.

A gold IRA is usually going to have administrative and custodial fees every year, but these are often flat fees regardless of the size of your investment, so a gold IRA might be cheaper in terms of fees and costs.

If you’re thinking about investing in precious metals, then why not get some free ones? Depending on the size of your rollover, you might get 5% or even 10% of your total investment matched in free silver products.

That’s an impressive bump to your portfolio value, especially if you’re maintaining the value.

When you do a rollover into a gold IRA from a previous retirement account, if you do it right, you won’t lose a dime of your wealth to taxes, penalties, or fees. The IRS has strict rules in place about how to to this, and it usually has to happen within 60 days.

However, every gold broker should know how to do execute that flawlessly.

One rollover advantage you might like is how much clearer the rules are for gold IRAs. Every 401(k) plan has its own set of rules, and the employers have a lot of say into what goes on with them. However, gold IRAs are handled by the IRS, and you can read about all their rules freely online.

Estate planning is another matter. If you pass away while your 401(k) is still active, it’s likely to be paid out in full to a beneficiary immediately, an that can cause tax and income problems that need ironed out. A gold IRA might have more distribution options that give them time to spread things out.

Gold IRA Downsides

Can investing in a gold IRA be a bad idea? As much as I advocate for them, I recognize that they’re not always the right answer. Sometimes, the gold is the wrong move, and other times, it’s using an IRA that is a bad idea.

  • Why Gold Isn’t Always a Great Investment

Gold can be a great investment, and it certainly has been for many people. However, the future doesn’t always turn out like the past, so there’s no assurances you’ll reap the benefits that others have. Precious metals can turn out to be a bad move for a number of reasons.

You would think that gold would be a something investors would be flocking to right now because of inflation around the world. It’s certainly done well in the past when there were periods of inflation.

a stack of six gold bars above a graph showing a downtrend

Then again, there’s a new kid on the block, and that would be blockchain technology.

Cryptocurrencies might actually be eating into the overall market share of gold. Some investors feel that cryptos could work like gold usually does. The value of Bitcoin is hardly stable, but the supply is fixed and there is potential for serious performance.

I’m not a digital currency expert, but I do see the potential similarities between gold and cryptocurrency. The thing is, gold is a proven asset while cryptos are still emerging.

Would cryptocurrency mean more risk or more profit? It’s a serious gamble, but crypto is striking a chord with younger investors. If that means less demand for gold, that might not mean the values of it grow as much as has historically happened, and it could slow the performance of this precious metal moving ahead.

This round of inflation might also be different. If interest rates go up, and they’ve already gone up some, then dollars have less spending power. That makes it more expensive to get into gold, or anything else for that matter.

Why IRAs Are Sometimes Bad Ideas

As great as the intentions are behind IRAs, they’re not the only way to do investing. They’re not even the only way to save for retirement. This side of gold IRAs can sometimes actually be a bad idea.

For starters, despite the benefits of possibly using pre-tax income to fund a gold IRA and lower capital gains taxes when withdrawing, you’re not going to get tax-advantaged income inside the account.

Gold doesn’t pay you dividends or interest like stocks and bonds might. Conventional or Roth IRA investing has tax-free growth, but that won’t happen with precious metals.

Fees are something else to consider. The IRS won’t let you keep your precious metals in your own home. You can’t even put them in a safety deposit box at work. You have to pay for a depository and its annual fees, and the account administration from the broker might also have annual fees.

You can’t use your own gold, either. If you already own coins or bullion, you can’t use them in a gold IRA. The account has to be funded with fresh purchases. Those purchases also have to meet stringent requirements the IRS lays out for you.

You can’t even make your own purchases. You have to have a custodian do all the transaction work for you. The IRS might call this account “self-directed”, but it’s surprisngly hands-off.

Picking the Right Broker Matters

two shake hands after agreeing on a broker agreement

By this point, you know that gold IRAs have plenty of reasons that make them good ideas but also a few things that could them a bad idea. There is one aspect that make or break your experience, and that’s choosing the right broker or not. Picking one that suits your needs can make for a seamless and effective investment experience.

However, you can also derail your plans by choosing one who is a bad fit, even if they’re a highly rated broker.

It honestly depends on what you’re looking for, be it customer service, low fees and transparency, client education about gold investing, low minimums, or rollover assistance. If you simply want to be treated with white gloves, so to speak, then Goldco is where you should start looking. Their customer service is simply unparalled across the entire industry.

I’m about to mention several other names, and I want you to know that they all have customer service that ranges from good to great.

However, nobody does it better than Goldco. I can’t emphasize that enough. Here’s a quick Goldco overview:

9.7/10Our Score
  • New customers might get 10% free metals in silver coins
  • First-year fees might be waived
  • Goldco reps don't get pushy with heavy sales tactics
  • Staff are quite friendly and knowledgeable to new investors
  • This broker wants investors to make good investment choices
  • Minimum investment level stands at $20,000
  • Website not totally transparent about fees

If rollover assistance is something you want help with, then I’d also suggest contacting Regal Assets (learn more at their website). They have carved out a niche for themselves as the best rollover specialists in the industry. Remember that you can get free communications and consultations with any gold broker before you sign up for a permanent account.

If you’re looking for transparent pricing and exception client educational resources from Harvard-trained analysts, then Augusta Precious Metals is worthy of consideration. Birch Gold Group is also a great place for low prices and lots of educational materials.

Do you want low minimum investments so you don’t put too much into gold at the start? Noble Gold usually has the lowest entry point in the industry for their gold IRAs.

No matter how advantageous a gold IRA might be, if you pick a broker that’s not a good fit for your needs, you’re not going to get what you want out of this.

Summary: Are Gold IRAs a Good Idea?

Is a gold IRA the right move for you? It can be, if…

  • You have more than $100,000 saved up for retirement since the 5% asset allocation often advised for gold would equal the $5,000 minimum investment usually necessary for a gold IRA.
  • You want to preserve the value of some of your wealth as you get close to retirement from inflation and market volatility.
  • You want to do a rollover from other retirement accounts and turn cash or other assets into precious metals.

Otherwise, a gold IRA might not be a great idea, if…

  • You don’t have enough for the minimum investment with any broker or it would put too much of your portfolio into precious metals (more than 15%).
  • You prefer to have physical possession of your metals or want pieces that fall outside the IRS approval guidelines, such as rarities and collectibles.
  • You need to liquidate before you hit retirement age or later.

Gold IRAs can be powerful investment vehicles, but they’re not right for everyone. I always advise investors saving for retirement to look at them, but ultimately it will be up to you and your financial advisor to decide on the best course of action for your retirement savings.

However, I also realize that they might not make sense if your financial objectives lie elsewhere.


About the Author

Mitt Wilson has a background in journalism and has been writing about investing for more than two decades. In his free time he enjoys spending time with his wife and three children.

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