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What is a Gold IRA & How It Works?

Donny Gamble
January 21, 2022
what is a gold ira
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Preparing for the future can be a daunting task. Nobody wants to think about spending money thirty years down the line; they want it now. Investing in your future requires diligence, patience, and a solid gold IRA.

With a precious metals IRA, numerous Americans have begun to secure their retirement with assets. We all know about inflation and how liquid cash loses value, which is why you need something that accrues, not declines.

Gold in IRA accounts tends to be the answer for a lot of people like you and I that want security, market value, and appreciation over time. It’s an investment that you don’t have to constantly track or think about every minute of the day.

Let’s talk about why it’s still the number one IRA option for investors to take hold of.

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A Detailed Look Into Gold IRAs

Gold IRAs allow you to invest pre-tax dollars through a broker, and purchase gold to secure your retirement. Gold is a popular choice because of its historical appreciation over time, regardless of the few declines it’s had in the past.

While gold is a solid investment, it has its volatility, which is why you should diversify your IRA with other investments. You can find this bit of advice anywhere, because just about every serious financial advisor will tell you the same thing.

A gold IRA can be a tremendous part of your retirement plan, but there is an annual cap set by the IRS, otherwise you could just dump millions of pre-tax dollars in with no penalty.

On top of that, gold IRAs have annual costs that you have to factor into your investment, and account for larger fees for bigger segregated vaults as your collection of gold bars increases in size.

Custodians Will Manage Your Gold IRA

Your gold has to be stored in a licensed custodian facility in order to qualify for your IRA; you cannot keep your gold at home or in a location that you manage, otherwise it cannot be confirmed by the IRS.

If they can’t confirm the investment, as far as they’re concerned, you don’t have one.  Custodian services manage your gold’s safety for you in exchange for an annual fee, and generally a one-time account setup fee on top of it.

Your gold IRA company can help you set everything up and explain their own brokerage fees to you as well. There’s a lot to learn regarding co-mingled storage, different depository fees, and more.

Coins vs. Gold Bars in Gold IRAs

There’s a debate between coins and bars for gold storage, but when it comes to your IRA, coins are not a good investment. In fact, many don’t ever refer to coins as an investment, because apart from collector’s value, they don’t actual accrue real value over time.

Perhaps one specific coin with a specific image or figure on it will rise in price, but the cost of the gold itself actually doesn’t. Coins are a collector’s item because of their finesse, or rather, the percentage of their entire makeup that is pure gold.

Gold bars must have a 99.9% finesse rating in order to qualify for your gold IRA. You can see where the issue is with coins versus bars.

Coins have an emotional value aspect to them as well because of the nature of collector’s items. You only ever “collect” gold bars for their monetary value and to secure investments, so there’s no emotional aspect to it.

How to Buy Precious Metals for Your Gold IRA

Your gold IRA will be self-directed, meaning you have to contact a broker or the firm that you purchased your IRA through and place a gold order. These brokers are the only ones that can buy gold directly from the mint.

The gold in your IRA has to be stored in a depository. Your broker will contact the depository and set up a delivery date, and the secured delivery will occur and credit your account.

Essentially, once you contact the broker and put in the buy order, it’s just a waiting game. You have to make sure that everything is credited to your account before you can rest easy, but once it’s there, you’re all set to go.

Should You Open a Gold IRA Account?

Gold IRA accounts are a way to protect yourself against inflation, and the uncertainties of the future, while allowing your money to make money. You shouldn’t put all of your investments into gold, though: any good portfolio should be diversified, whether it’s high-risk or long-term.

You’re at the mercy of custodians, your IRA firm, and purchasing prices of gold, but you’re still in control of your assets. With your self-directed IRA, it puts you in control of your retirement investment. 

Gold IRAs are a great idea for the future, even if it’s not the main pillar of your retirement plan.

Gold IRA FAQ's

What are the benefits of a Gold IRA?

Gold IRAs offer the same tax benefits as a lot of other investment and account types, including being completely tax deferred, giving you better control over your finances with something that isn’t exclusive to the US dollar, and being a long-term hold that allows you to build up your wealth over time. 

As the price of gold rises, so does the value of your IRA.

How much does it cost to start a Gold IRA?

Typically, you can expect to pay a minimum of three costs with a gold IRA. Your account setup fee, purchase order fees, and annual custodian fees for the depositories and staff to maintain your gold and keep it safe.

The best way to keep these costs low is to be very picky with your gold IRA firm (whom you will purchase gold through), and pay attention to the depositories that they use.

Be aware of fees, shop around, and know that while you’re never going to get this service for free, you should get the service you want at the right price; there’s a fair share of options out there.

What gold is IRA approved?

Bullion and rounds are approved for a gold IRA if they meet the IRS finesse standard, which is 99.9% purity. The remaining 0.1% (usually lower than 0.1%) is composed of an alloy to assist with the smelting process and maintain the integrity of the gold.

If your gold doesn’t meet these standards, then it’s simply not gold IRA approved. While most gold commemorative coins end up being around 92% finesse, even those around 99.9% should not be personalized, embedded with historical figures, and/or custom in any way. Don’t go for collector’s coins.

Is a gold IRA tax deductible?

A gold IRA is tax-deferred, so you’re not going to pay taxes on the contributions you make. It works just like a traditional IRA, where you’re only hit with major taxation if you withdraw money from the account before you’re 59 ½ years old.

Investing in your gold IRA is important, but sticking it out for the long haul is even more important. Some individuals have lost years worth of savings by having to withdraw early, so just because it’s tax-deferred doesn’t mean it isn’t still risky (just don’t live beyond your means and have an emergency fund available).

Augusta Precious Metals

This company has proven its commitment to exceptional customer experiences and education to help Americans savers use physical gold and silver in an IRA to gain retirement peace of mind.

About the author 

Donny Gamble

I’m Donny. I’m a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.

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