You may have heard the buzz about Gold or Silver IRAs, and if you have, you might have a few questions. This article is a brief outline of what makes a Gold IRA. We’ll also discuss why you might want one–or why you might not.

The Basics

If you’re unfamiliar with how IRAs (individual retirement accounts) work, then we recommend reading up on it here

A Gold IRA, more accurately called a Self-Directed Precious Metals IRA, works the exact same as a traditional IRA, but instead of the cash contributions you make sitting in a savings account, or going toward stock or mutual fund purchases, the funds go toward purchasing gold, silver, platinum, or palladium.

Nuts and Bolts: Bars and Coins

Now, you should be aware that when you have a self-directed IRA, you are in charge of all investments your account makes–but you are not able to physically possess the assets your account holds if you want the protection of an IRA.

That means that when you direct your Gold IRA to purchase a bar of gold, that bar is held in a secure facility–like a bank or depository. You cannot hold that gold bar in your home. If you’re interested in holding physical gold, check out my article here.

Several gold IRA companies have excellent relationships with depositories and can facilitate your storage. But there is a fee for shipping, housing, and securing your gold or silver.

In addition to that, there are only certain types of precious metals that you can hold in your IRA. Here’s a brief list of common IRS-approved metals:

  • American Gold Eagle (or silver/platinum/palladium). 
  • Australian Gold/Silver Philharmonic coins.
  • British Gold/Silver Britannia coins. 
  • Bars certified by the NYMEX (New York Mercantile Exchange).

Other gold and silver coins are not authorized for IRA purchase. These include some very common, and very secure, metals. Nonetheless, they are not viable IRA investments.

  • Collectible coins. 
  • Historic memorabilia.
  • Jewelry. 

How It Works

When you have decided to set up a Gold IRA, there are several steps to follow.

First, choose a good broker and custodian. I reviewed a number of great companies, and that list is a great place to start.
The next step in the process is to move money over to the broker, which they will help facilitate for you. 
Then you work with that broker to make an acquisition (If you want more information on this step, check out my short article on purchasing gold for an IRA). Once the gold is purchased, shipped, and stored, you sit back and watch the markets.
Once the gold is purchased, shipped, and stored, you sit back and watch the markets.

Like with any stocks you ever purchase, you realize your greatest benefits when the prices go up and you sell your assets. Unlike stocks, however, gold and other precious metals do not earn dividends.

When you retire, or if you wish to make a withdrawal prior to retirement, you can liquidate, or sell your precious metals at the market price, or you can arrange for it to be shipped directly to you. However, any shipment of your gold counts as a withdrawal on your account; if it is before you are 59 ½, you could be penalized.

Quick Last Word

A Gold IRA isn’t for everyone. It can be a great hedge against inflation, and is a fantastic diversification for your portfolio. But remember that you will not be able to hold your gold physically and it will not earn dividends the way stock does. Happy investing.

About the author 

Greg Lorenzo

Greg is a financial expert who has been advising his audience on loans for over 10 years. He has a wealth of knowledge and experience in the area, and he is passionate about helping people get the best possible deal on their loans. Greg is an expert in negotiating loans, and he has a proven track record of getting his clients the best possible terms. He is also a strong advocate for financial literacy, and he regularly gives workshops and seminars on the topic.

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