Investing in precious metals can help you protect your wealth from economic crises. Stashing gold bars in your home safe might sound like a fine idea. But it’s going to leave you on the hook for a potential tax bill from Uncle Sam. If you want to pay less in taxes, then you’ll need a Gold IRA.
What is a gold investment IRA? It might just be your key to a secure, tax-efficient retirement.
This article will explore everything that you need to know about investing in gold using a strategy that minimizes your tax burden and helps protect your wealth.
What is a gold IRA?
A gold IRA, which some people also call a precious metals IRA, is an individual retirement account (IRA) that allows you to hold approved precious metals as a qualified retirement investment. This helps you to grow your investments and defer taxes until you’re ready to retire.
You can open a Gold IRA in the form of a Traditional Gold IRA or a Roth Gold IRA. These accounts are nearly identical to a Traditional IRA and a Roth IRA that you use to hold stocks and bonds.
If you’re already familiar with these traditional retirement tools, then good news! You’ll have a small learning curve when it comes to Gold IRA. That said, you’ll still need to open a separate Gold IRA even if you already have a Traditional or Roth IRA.
The IRS contribution limits are the same across all of these retirement accounts. You can contribute $7,000 to your gold IRA account as of 2024 or $8,000 if you’re age 50 or older.
Approved metals for gold IRAs
Precious metal IRAs allow you to hold physical metals instead of conventional assets like stocks, bonds, or Treasury Bills. Despite being called “Gold IRAs,” these accounts can hold other metal assets, including silver, platinum, and palladium.
However, this doesn’t mean that any piece of gold or silver is eligible for your IRA. The IRS has rules about which precious metals qualify. These include:
Purity: They must meet a minimum fineness requirement of .995
Production: A national government mint or precious metals manufacturer must produce your metals.
Form: You can buy physical precious metal bullion in the form of gold coins or bars.
A precious metals dealer like Swiss America can help you choose the right metals that meet IRS rules and also your specific needs.
Benefits of a Gold IRA
There are plenty of reasons that investors decide to invest in a precious metal IRA.
Tax savings
Opening this type of retirement account can allow your money to grow tax-deferred over time. The specific tax savings you’ll receive depend on the type of account that you open:
Traditional Gold IRA: You fund these accounts with pretax dollars, which means that your contributions are tax-deductible. Your earnings will grow on a tax-deferred basis, and withdrawals get taxed at retirement at your then-current income level. This is a good option if you believe that your income will be lower during retirement than it is now.
Roth Gold IRAs: You’ll fund Roth accounts with after-tax money, which means there are no immediate tax advantages. But the benefit here is that you won’t pay taxes when it comes time to start taking withdrawals. You can also take out your contributions at any time without penalty since you already paid taxes on them.
Either option means that your investments grow more effectively and help your wealth to compound over time.
Diversification
Diversification is one of the main benefits of why people hold physical gold in their IRA. Gold’s value tends to be much more stable than most assets and often moves independently of stock and bond markets. So if the market goes down because people are worried about the latest “tech bubble” or what might happen with the economic jobs report, the value of your gold doesn’t see the same impact.
Adding metals to your portfolio can help bring security and peace of mind during periods of economic uncertainty. If there’s a recession, your gold investments can remain stable or even increase.
Easily converted to cash
You can generally convert precious metals into cash fairly quickly if you need to. This is because gold, silver, and other metals are in high demand everywhere in the world. You can easily sell them to a dealer at their fair market value.
Keep in mind that if you have a traditional Gold IRA, the IRS imposes a 10% early withdrawal fee, plus you’ll need to pay ordinary income taxes if you sell your assets before your retirement age of 59 1/2.
Strong historical performance
Investors usually view gold as a source of stability, not growth. Whenever the economy or world is in chaos, gold does very well. With the current uncertainty about whether we’ll have a “soft landing” and avoid a recession, plus wars in Russia-Ukraine and the Middle East, investors want safety. That’s why gold’s been rising in recent years.
Since 2019 the average annual return of gold is 12.58%. This is:
Slightly higher than NASDAQ’s return of 12.55% per year
A bit lower than the S&P 500’s return of 16.69% per year
Investment experts at Goldman Sachs expect gold’s growth to continue, stating:
“Gold is our strategists’ preferred near-term long (the commodity they most expect to go up in the short term), and it’s also their preferred hedge against geopolitical and financial risks.
The Swiss America team also discusses gold trends on our podcast. Back in August, we shared how gold could reach $3,000 an ounce:
Hedge against inflation
Gold’s consistent price increases can help protect investors against currency devaluation caused by inflation. This is because gold’s price tends to increase at a level higher than the rate of inflation each year. Investors look for assets that maintain their value, and since gold is one of those assets, they buy more, driving up the price.
Because there is only so much gold on earth, we have a limited supply. This is different from paper money, where the government can always print more. When they put more currency in circulation, it takes more money to buy the same goods and services.
Protection against economic instability
People look at gold and other precious metals as a way to protect against economic uncertainty. When everyone starts getting nervous about the economy, they stock up on gold, silver, and other metals. Physical precious metals have inherent value for their uses across different commercial industries.
For example:
Gold: Besides investment value, gold’s industry uses include electronics, dentistry, and spacecraft.
Silver: We’re seeing silver rise right now since it’s a big component in the sustainable energy movement. It supports solar panels and electronic vehicles.
Platinum: A larger driver of the demand for platinum comes from catalytic converters in gasoline-powered automobiles.
Downsides of a gold IRA
All investments have areas to consider like risk, return and downsides. Here are areas to keep in mind for Gold IRA investing:
No interest or dividends
Unlike stocks or bonds, gold doesn’t generate dividends or interest. This lack of income potential means that investors must rely solely on price appreciation to realize gains. For investors, this can potentially lead to lower returns if gold’s price remains stagnant.
Gold’s lack of income creation also means that retirees may need to sell their gold in order to fund their retirement versus living off the interest of other assets.
Fees
Gold IRAs have fees just like traditional IRAs. These fees may include setup fees, storage fees, or custodian fees. Investors may also want to pay for insurance to help protect their gold against theft, loss, or damage. These costs can eat into returns over time, especially if the price of gold doesn’t appreciate significantly.
Gold IRA storage
You’re well within your rights to buy physical gold and store it in your home. However, you won’t legally able to enjoy the benefits of an IRA unless you work with an IRS-approved custodian or depository.
IRS-approved custodian
When you open a Gold IRA, you must work with an IRS-approved custodian who specializes in precious metals IRAs. This custodian will handle purchasing, storing, and managing the gold on your behalf since you are not allowed to store it yourself. It’s important to select a reputable custodian, as they have a key role in ensuring IRS compliance.
IRS-approved depository
The physical gold in your Gold IRA must be stored in an IRS-approved depository. Depositories are secure, specialized storage facilities that meet stringent requirements to protect the assets and provide insurance against loss or theft. These facilities have high-level security measures, including armed guards, advanced monitoring systems, and restricted access, to confirm the safety of your metals.
Most depositories offer two different types of storage for your precious metals:
Segregated Storage: This option stores your gold separately from other investors’ holdings, so the exact coins or bars you purchase are in a designated area within the vault.
Commingled Storage: This option stores your metals together with other investors’ gold in a shared area of the vault. You still maintain ownership of a specified amount, though it may not be the exact pieces you purchased.
How to get started with a gold IRA
Getting started with a gold IRA is a simple three-step process:
1) Find a custodian that offers gold IRAs
The first step is to find a reputable custodian who can help you open a gold IRA. This custodian will manage the account on your behalf — per IRS regulations — so it’s important to find a reputable company. Be sure to find a custodian who specializes in precious metals IRAs, has strong customer reviews, clear fee structures, and good customer service.
2) Fund your IRA
You can make cash contributions to your IRA, following the annual contribution limits set by the IRS. Or, you can also roll over funds from an existing retirement account that you may already have. Keep in mind that you can conduct a direct rollover or transfer of your assets from an existing retirement account like a 401(k) or IRA will not incur any taxes or penalties.
3) Buy and store your gold
From here, Gold IRA companies help you select which precious metals to buy and which forms to buy them in. Once your account holds your retirement funds, you’ll direct your custodian to purchase the metals on your behalf and arrange to ship your metals to an IRS-approved depository.
Depending on your age, you may also want to make a plan for your withdrawals. You can technically make withdrawals from your gold IRA at any time. But, doing so before the age of 59.5 years old will require you to pay a 10% tax on top of income tax and any potential gains. To avoid this tax, start taking your distributions any time after age 59.5.
Why Gold IRA investors choose Swiss America
You can work with a precious metals dealer like Swiss America to buy gold or other metals for your IRA. Here’s why thousands of investors trust us for their gold individual retirement accounts:
Longevity
We’ve been in business for decades, which means we’ve been through various economic ups and downs. Plus, we aren’t a fly-by-night operation looking to scam customers.
Customer reviews
You should always check out reviews and customer testimonials. Swiss America’s thousands of happy clients enjoy fast delivery of high-quality metals, responsive and knowledgeable customer service, and consistent performance that meets or exceeds expectations.
Education and advice
The right Gold IRA company should provide education and guidance to help you make the best decisions for your situation. Swiss America focuses heavily on investor education with resources like:
Video and podcast: We share economic news and updates in our regular podcast and Youtube videos to help you understand the drivers that impact precious metals investments.
Research reports: You can find several in-depth research reports from our team covering topics like The Secret War On Cash, The Timeliness Truth About Gold & Silver, and The Silver Report.
Daily news: Get the latest update on what’s happening in the world and its impact on Gold IRA investing through our newsletter or daily news page.
Broker expertise: Every member of our team has a deep understanding of the gold market and extensive training. We’re here to help you evaluate options, convert your IRA to gold, choose the right custodian, and even secure storage methods.
Transparent pricing
At Swiss America, we provide transparent pricing for both our metals and any transaction costs. You’ll know exactly what the premium is above the spot price and any establishment fees for Gold IRA accounts.
Reporting
Check the status of your account value at any time via our online portal. This information gives you real-time value of your physical gold or other metals.
Gold trade program
Our customers also benefit from our gold trade program, which lets you sell your gold back to us when needed, providing liquidity for emergencies or portfolio rebalancing.
Gold in IRA final thoughts
Opening a gold IRA is the best way to invest in precious metals while also enjoying the tax benefits of retirement accounts. By storing your gold in an IRA, you can grow your wealth in a tax-deferred way. Taking this small step will have massive implications for your wealth, retirement, and well-being by the time you’re ready to retire.
Ready to learn more about a gold or precious metals IRA? Connect with the Swiss America team today to start learning which precious metals are best for your investment needs.
Gold investment IRA: FAQs
Is gold a good investment for an IRA?
Gold can provide stability and financial protection to an investment portfolio. However, whether gold is a good investment for an IRA depends on your financial goals, risk tolerance, and investment timeline.
Is a gold IRA tax-free?
While a Gold IRA isn’t entirely tax-free, it offers tax-deferred growth for traditional IRAs and potential tax-free withdrawals for Roth IRAs, providing tax advantages depending on your retirement strategy.
How does a gold IRA work?
Gold IRAs allow you to invest in physical gold or other precious metals with your retirement funds. To do this, you transfer your funds to a self-directed IRA custodian who buys the metals on your behalf.
Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
