Gold IRA: What It Is And How It Works 


One significant challenge in saving for retirement is the unforeseen inflation rates. Assume you save USD$1,000 for retirement and the annual inflation rate is 2%. In 30 years, you’ll only be able to buy goods and services worth USD$552. And, if the inflation rate is 3%, you’ll be worth only USD$412 after 30 years.

This isn’t news. In the past years, the US has witnessed even higher inflation rates. Take the example of 1981 when inflation hit the unbelievable mark of 13.9%. If such an extremely high inflation rates hit the economy, the value of your money could drastically reduce.

What Can You Do About It?

Aside from inflation, things such as political upheavals, crumbling stock markets, tax increase, and black swan events can get you into considerable financial trouble. Since these are things you can’t control on your end, you may want to consider safe haven investments.

By definition, safe haven investments are those investments that are expected to increase or retain their value in times of market turbulence. This limits your risk of losses in future.

Now, gold is one of the most popular safe haven investments. For so many years, gold has been constantly increasing in value. And the upward trend isn’t likely to reverse anytime soon. You may want to visit sites like Learn About Gold for a deeper insight into gold investments.

What Is Gold IRA?

Starting with the IRA part, you’re looking at an individual retirement account taken care by a gold IRA custodian. This is a retirement savings plan provided by financial institutions. You’ll usually hold paper assets such as stocks and bonds in your traditional IRA account. On the one hand, a gold IRA is where you hold physical gold in your IRA account. Although simply referred to as gold IRA, you can also have other precious metals, such as silver, platinum, and palladium, in your account.

List Of Acceptable Precious Metals

The Internal Revenue Service (IRS) has standards regarding the range of precious metals you can hold in your gold IRA account. You can purchase gold coins or bullions, as long as they’re at least 0.995% in purity.

Here’s a detailed list of the precious metals accepted by IRS:

  • Gold

    • American Gold Buffalo coins
    • Chinese Gold Panda coins
    • Australian Gold Philharmonic coins
    • Canadian Gold Maple Leaf coins
    • British Gold Shengxiao
    • British the Queen’s Beasts
    • British Gold Britannia coins
    • American Gold Eagle Proof coins
    • American Gold Eagle Bullion coins
  • Silver

    • Mexican Libertad coins
    • Chinese Silver Panda coins
    • Austrian Silver Philharmonic coins
    • Australian Silver Kookaburra coins
    • Canadian Silver Maple Leaf coins
    • British Silver Shengxiao
    • British the Queen’s Beasts
    • British Silver Britannia coins
    • American Silver Eagle Proof coins
    • American Silver Eagle Bullion coins
  • Platinum

    • Australian Platinum Koala coins
    • Isle of Man Noble coins
    • British the Queen’s Beasts
    • Canadian Platinum Maple Leaf coins
    • American Platinum Eagle Proof coins
    • American Platinum Eagle coins
  • Palladium

    • Canadian Palladium Maple Leaf coins
    • American Palladium Eagle Bullion coins

Starting A Gold IRA

First and foremost, you need to open a self-directed IRA account. This enables you to invest in valuables that you otherwise wouldn’t be able to invest in with a regular IRA.

Next, identify a reliable precious metal dealer who’ll purchase the gold for you. Remember, you can’t do this on your own, as the law stipulates. The dealer can be a bank, brokerage firm, credit union, trust company, or a savings and loan institution. They must be approved by the IRS to hold gold on your behalf.

The third step is to fund your account. You can deposit cash or transfer funds from other retirement accounts. You can, then, choose the specific precious metal you want to invest in and your custodian will do the transaction for you.

Benefits Of A Gold IRA

Gold IRAs have several advantages over traditional IRAs, otherwise they wouldn’t be there in the first place.

Here are the benefits of investing in a gold IRA:

  • More control: With the self-directed IRA, you have more freedom regarding the investment decisions you can make, instead of being limited to paper assets and cash.
  • More legitimate gold IRA companies: Some years back, gold IRAs were quite difficult to open due to the scarcity of reliable information, complicated legal requirements, and shortage of IRA companies. That has changed so far. There are now more IRS-approved gold IRA firms to choose from, and the legal requirements have been simplified.
  • Great diversification: They told you not to keep all your eggs in one basket. It’s wise to diversify your investment portfolio as you never know what the future holds. So, when your cash reserves lose value or when the stock market crashes, your gold assets will still be there for you. And, that’s the meaning of financial security.
  • Assurance: The value of precious metals, such as gold, has never fallen to zero. Although their prices fluctuate daily, they’ll never go out of business. As a matter of fact, the economic factors that weaken cash, stocks, and bonds are known to increase the value of precious metals.
  • Tax benefits: Gold IRA accounts generally receive the same tax benefits as traditional IRA accounts.

Potential Risks Of Gold IRA

Like any other investment, gold IRAs have their downside. Here are some of the disadvantages of gold IRAs:

  • High startup and maintenance costs: You’ll have to foot costs, such as the seller’s fee, account setup fees, custodian annual maintenance fees, storage fees, insurance fees, wire transfer fees, cash-out costs, and penalties for premature withdrawal. Depending on the gold IRA company you choose, these costs can significantly add up.
  • Fraud: If you’re dealing with a non-reputable firm, your gold deposits can be sold without your knowledge. Some will even cheat you regarding the initial purchase. You have to be very careful about the company you choose.
  • Withdrawal challenges: As gold isn’t a liquid asset, you may experience difficulties and delays when you want to convert your gold deposit into cash for withdrawal.

The Bottom Line

How does it sound so far?  Have you weighed the pros and cons and found the winning side?  If your mind isn’t made up yet, consider digging deeper into gold investments, and you’ll soon be able to make a concrete decision.


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