In this post, we will explain what a Gold IRA is as well as outline the pros and cons of investing in gold via a gold IRA. We will also give a comprehensive verdict on whether you should get into a gold IRA. And you’ll learn about 2 companies we love for gold IRAs, Augusta Precious Metals and American Hartford Gold.
Gold IRA Explained
A Gold IRA is a separate account for holding gold in an IRA. The thing is; you cannot hold physical gold in your regular account. That is why you need to have a gold IRA.
A gold IRA is also referred to as a precious metal IRA and it works almost like a regular personal retirement account. That is to say the contribution limits as well as distribution rules are pretty much the same. The only difference between a gold IRA and a regular personal retirement account is that unlike a personal retirement account, which is for holding paper assets like bonds and stocks, the gold IRA is for holding physical bullion. Bullion basically refers to gold bars or coins as well as other approved precious metals such as palladium, platinum, and silver.
A gold IRA can also deal with gold stocks i.e. shares of gold mining or production companies; gold ETFs, which track gold indexes, and gold mutual funds, which invest in stocks or bullion, or both. We recommend you look at an Augusta Precious Metals review to get more info about the company Augusta Precious Metals.
Advantages of Investing in Gold IRAs
Gold IRAs are like other investments in the sense that they have both their risks and advantages. Let us start with the advantages.
1. Freedom
Most people who invest in gold IRAs are thrilled by the fact that it is self-directed. This means the investment allows you to manage your holdings directly. Another freedom is that you get to make decisions concerning investment.
2. Comes with Tax Benefits
Gold IRAs are similar to standard IRAs, to some extent. For example, both of them offer special tax treatment. And this means contributions made to traditional IRAs (self-directed) are tax-deductible.
3. Long-term Investment
Both IRA holdings and physical gold are not very liquid. Ideally, gold is perfectly suited to an IRA since it is a long-term investment (you kind of buy and hold). And, in the IRA, you do not touch the assets until it is time to retire. And like Augusta Precious Metals, American Hartford Gold is another great option. See this review of American Hartford Gold to see if they are right for you.
Drawbacks of getting into a Gold IRA
Before you get into a gold IRA, it is always crucial that you consider these cons. This will help you make an informed decision.
1. Restrictions in Funding
If you already own some precious metals, then you are not allowed to move them into your Gold IRA. You are also not allowed to personally buy precious metals and then put them in your IRA. That being said, you will need someone (a custodian) to carry out transactions on your behalf.
2. Higher Custodial Fees
It is impossible to keep your gold in the bank’s safe deposit box or at home. This means you will have to pay a custodian to insure and store gold held in your IRA. The custodian also buys, transports, and ships these precious metals. Well, the custodial fees of gold IRAs are normally higher than the fees of regular IRA management.
3. No tax-advantaged Income
Another drawback of gold IRAs is that gold bullion does not pay dividends, interest, or other returns. Therefore, it is safe to say that this form of investment does not take full advantage of the zero-tax benefit it is associated with. The only way to enjoy capital gain is by selling your precious metals at a profit.
Verdict: Should I get into a Gold IRA?
Gold IRAs have their benefits and drawbacks. Therefore, you need to assess all the risks so you are not disappointed in the event that things do not turn up as expected. Overall, a gold IRA is recommended for someone who wants to diversify and, at the same time, enjoy the benefits that only gold offers.
According to most financial experts, you should keep between 5-percent and 10-percent of your portfolio in gold. That being said, it is not necessary that you invest your gold via a gold IRA. There are other options you can explore as well.
The most common ones are:
• Buying coins or bullion then storing them in your own account. However, you must note that you will have to part with some money to insure these coins.
• Investing in funds or gold stocks that can be held in a brokerage account or regular IRA
• Trading gold options through a trading platform or broker
To summarize, investing in gold IRAs is a smart move. But if you do not prefer it, for one reason or another, but think that investing in gold is the way to go, you should consider the three options we have mentioned above.