Gold IRAs are a specific type of self-directed IRA that allows you to invest in physical gold and other precious metals such as silver, platinum and palladium. Investing in a gold IRA requires the service of a custodian, a broker for buying gold, and an approved depositary to store gold. Like other self-directed IRAs, gold IRAs can be traditional or Roth. In addition, while the IRS allows gold coins such as the American Gold Eagle, American Buffalo, Canadian Maple Leaf and Australian Gold Nugget, it does not allow investment in South African Krugerrands or British sovereign gold coins.
Some investors believe that holding physical precious metals is less risky than investing (either directly or through funds) in stocks in the gold industry, such as mining companies. Another alternative is a gold ETF, an exchange-traded fund that tracks the performance of gold as an asset. You can transfer all or part of the balance to finance a gold IRA without incurring a tax liability, as long as you reinvest within 60 days. Those who prefer to invest in the stocks of gold companies (such as Barrick Gold), in the mutual funds of those companies (such as Fidelity Select Gold Portfolio) or in ETFs that track the performance of a gold index (such as SPDR Gold Shares), can do so with a conventional IRA.
Many people who seek to avoid this risk let their gold IRA company facilitate it through a transfer from one institution to another, rather than taking it on themselves. While traditional IRAs, 401 (k) and the like are configured to make it easier for you to create a diverse retirement portfolio to mitigate risk, a precious metals IRA is dedicated to a single asset class. Surprisingly, a gold IRA doesn't just have to hold gold; in fact, it's not necessary to have gold in one at all. Then you have to buy the gold or other approved precious metal and transfer it to the depositary so that the depositary can account for it, Moy explains.
Many of the custodians and brokers who open conventional IRAs who invest in traditional assets do not have the ability to open and operate an SDIRA, including a gold IRA. You can also invest in certain platinum coins and in certain gold, silver, palladium and platinum bars. You should also select a precious metals dealer who will make actual purchases of gold for your IRA (your custodian may be able to recommend one). However, instead of holding paper assets, such as stocks and bonds, the IRA with gold is intended to hold physical ingots, that is, coins or ingots of gold and other approved precious metals, such as silver, platinum and palladium.
To comply with the many regulations governing gold IRAs, you can't store your gold at home or in a bank safe. You can set up the SDIRA as a traditional IRA (tax-deductible contributions) or a Roth IRA (tax-free distributions).