If you want a comfortable and stress-free retirement, then strategic planning is critical. This might include leveraging employer-sponsored investment vehicles, like a 401(k) or 403(b), for example, or it may mean opening your own IRA.
With IRAs, you have two options: You can use your account to invest in stocks, bonds, ETFs, or other similar securities, or you can choose what’s called a self-directed IRA — often referred to as a gold IRA or precious metals IRA. With a self-directed IRA, you can purchase IRS-approved metals and tangible assets like art, collectibles, and real estate. Investors used these accounts to diversify their portfolios and protect against inflation.
If you’re currently planning for your retirement and are wondering how to invest in a gold IRA, this guide can walk you through the process.
In this guide:
- What to consider before starting a gold IRA account
- Why open a gold IRA?
- Steps to start investing in a gold IRA
- How long does it take to open a Gold IRA?
- When can I withdraw from my account?
What to consider before starting a gold IRA account
Before you open your gold IRA, it’s important to understand how these accounts work and what exactly they entail. Here are the basics:
Type of account
To start, you’ll need to know what type of account you want to open. Self-directed IRAs can be either traditional IRAs or Roth IRAs, and the difference comes down to how you want your money taxed. With Roth IRAs, you pay taxes before you contribute the fund to your account. With traditional IRAs, you pay taxes when you withdraw the money later on.
Contribution limits
There’s a limit to how much you can invest in a gold IRA, which varies by age. If you’re under 50, you can contribute up to $6,000 per year in a self-directed IRA. Once you hit 50, the limit jumps to $7,000.
Storing your gold
Gold and silver bought through a precious metals IRA must be stored with an approved bank or depository. Though some companies market “self-storage” IRAs, the legality of these are questionable, and you could face IRS penalties or fines for holding your gold purchases personally.
With that said, you can opt to take your gold, silver, or other metal as a distribution later on once you become eligible. (You can take them earlier, too, though you’ll pay a 10% penalty).
Fees
Gold IRAs do come with fees. These usually include a set-up fee, a storage fee, and many times, a management fee from the account custodian you choose. These range anywhere from $250 to $350 for the first year and $150 to $250 per year after that.
Fees on typical IRA accounts are usually much lower (or sometimes nonexistent). There are also no storage fees.
Why open a gold IRA?
There are many reasons to make a gold IRA a part of your long-term retirement plan. First, it can diversify your portfolio. If you’re heavily invested in stocks, mutual funds, ETFs, and other securities tied to the stock market, your portfolio could be at higher risk if the market struggles.
Funneling some of those funds into gold, silver, and other precious metals is a good way to mitigate that risk and ensure your portfolio can withstand a downturn in the market. (It ensures you’re not fully invested in just one area, so if one type of asset or security loses value, you still have investments elsewhere that you can tap into during retirement.)
Precious metals — and gold in particular — can also be a great hedge against inflation, as their price often rises when the value of the dollar decreases.
Finally, there’s also the opportunity for profit. Gold prices have increased significantly over the last five years or so, jumping from around $1,000 per ounce in early 2016 to over $1,700, as of March 25, 2021.
Steps to start investing in a gold IRA
- Choose a gold IRA company to work with
- Fund your account
- Select your metals
- Monitor the performance of your metals
Step 1: Choose a gold IRA company to work with
Choosing your gold IRA company is the first step toward opening your IRA. These companies will help you start the account, transfer in funds, purchase your metals, and ensure your gold and silver is shipped to an approved depository for storage.
In some cases, the company will also act as your account’s custodian, meaning they’ll handle the paperwork and IRS compliance for your IRA as well.
Gold is a popular investment these days, and there are many gold IRA companies you can choose to work with — each one with unique fees, services, and customer care quality. If you’re opening a gold IRA, you’ll want to choose carefully to ensure you get the best service at the best possible price.
Once you choose your company, you’ll need to fill out the paperwork to open your IRA and then fund the account. You’ll also need your driver’s license (or other state-issued I.D.) and details of your existing retirement accounts on hand if you plan to transfer money from a 401(k) or other IRA.
>> Read More: Best gold IRA companies
Step 2: Fund your account
Once you open your account, you’ll need to fund it before you can begin purchasing and investing in metals.
There are three options for funding your gold IRA, including:
- Cash contribution: You can use cash, check, or wire transfer to fund your account, just as you would with a typical savings or investment account. Keep in mind there may be a fee (on your bank’s end) if you choose a wire transfer.
- Rollover: Rollovers are used if you’re planning to take a distribution from your existing retirement account and roll it into your gold IRA instead. If you want to go this route, contact your current account’s administrator for instructions, and they can initiate the process. You can also choose to take a cash distribution from your existing account and then deposit it into your gold IRA yourself. Just make sure you do it within 60 days, though, or you could face a 10% penalty (unless you’re over 59.5 years of age.)
- Transfer: You can also do a direct account-to-account transfer. To do this, you’ll usually fill out a form with your existing account administrator, or your gold IRA custodian may reach out to them on your behalf. These types of transfers can take up to five days and are tax- and penalty-free.
Most investors choose direct transfer as it minimizes hassle (as well as the potential for costly penalties).
Step 3: Select your metals
When the money has cleared, and your account has been funded, you can then start purchasing your gold, silver, and other precious metal investments. Keep in mind that the IRS only allows metals of a specific type and purity to be held in self-directed IRAs, so you’ll need to be mindful of what you buy.
The exact process for purchasing your metals will depend on which company you open an account with. In some cases, your gold IRA firm will sell IRS-approved metals so that you can purchase your coins and bullion directly from them. With other companies, you will need to purchase your investments from a separate precious metals dealer and then direct your custodian to buy the items on your behalf (using your IRA funds).
Oxford Gold Group, for example, offers direct metal sales, and you can work with your assigned account director to purchase the approved metals of your choice. Once they’re purchased, they’re sent off via an insured courier to the Delaware Depository Service Company or Brink’s Global Services facility for safe and secure storage.
Step 4: Monitor the performance of your metals
Your ability to monitor your gold IRA’s performance depends on the account custodian. While some companies offer online dashboards for you to monitor your investments’ performance, others do not.
If regular updates and insights into your IRA’s performance are a priority for you, you’ll want to ask a representative upfront if these services are offered. Your custodian should be able to get you access to such monitoring.
How long does it take to open a Gold IRA?
The gold IRA application process can be completed quickly, taking only 10 to 15 minutes. Processing is fast, too, and your account can be opened in just a single business day in most cases.
From there, the rest depends on the speed of your funding. As long as your existing account custodian is quick to respond, transfers and rollovers typically take about seven to 10 business days. Funding your account with a mailed physical check may take longer.
Again, these timelines can vary by IRA company, so make sure to ask the firm you’re considering for estimates specific to their accounts and processes.
When can I withdraw from my account?
Per IRS rules, you can start taking penalty-free distributions from your account starting at age 59.5. Before that, there is a 10% penalty on any withdrawals.
Once you reach 70.5 (or 72, depending on when your birthday is), you’ll be required to take a minimum distribution each year. The exact amount will depend on your age, the type of account, and other factors. You can choose to take your distributions in the form of cash or via the actual metals you’ve purchased. These are called “in-kind” distributions.
What’s next?
If you’re looking to start a gold IRA account to diversify your investment portfolio, protect against inflation, boost your long-term wealth, or achieve another investing goal, be sure to compare your options first. Gold IRA companies can vary greatly, and choosing the best one for your investing goals is critical if you want to ensure a comfortable and hassle-free retirement.
As a starting point, you can check out our picks for the best gold IRA companies.