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Things to Know About a Gold IRA

posted by Chris Valentine

Should You Get a Gold IRA or not?

Have you been wondering whether you should add gold IRA to your portfolio? Are you curious about what you will get back from such a move? Will it really turn your retirement funds into gold? In this article, we will try to answer these questions and provide you with details about gold IRA. 

What Is Gold IRA 

A gold IRA is an individual retirement account that holds approved precious metals instead of paper assets for the benefit of the account owner. There are four precious metals that are allowed to be held in such accounts: gold, silver, platinum, and palladium. The metals must be in the form of IRS-approved bar or coin products. 

Why Are Such Accounts Gaining Popularity

Physical gold IRA accounts are becoming more and more popular since precious metals are not subject to inflation. The general rule is that the price of precious metals increases when paper assets start losing value. They also enable the diversification of a retirement portfolio, which provides better insurance to the account owner. 

How Does It Work

Before the 2008 financial crisis, only the most determined investors were willing to open and manage a gold IRA account due to the complex transaction process. Men and women have to find a custodian or trustee for the IRA along with an authorized depository. The bought precious metals had to be approved by the IRS and need to be transferred to the treasure house in a manner the custodian can account for. Since the crisis, however, more and more people started looking into gold IRA accounts and this lead to the creation of numerous companies who aim to facilitate the procedure by taking care of everything from start to end.     

Finding a Custodian

The first thing that you must do is to find a broker who specializes in IRS-approved precious metals. Most dealers can recommend you to a custodian who will create and administer your self-directed IRA account. Trustees are generally banks, credit unions, trust companies, brokerage firms, or savings and loan agencies. Custodians must be officially approved by federal or state institutions to offer asset-guardianship services to individuals and financial organizations.

How to Choose a Custodian

It’s very important to choose a custodian that you can trust with your portfolio and investment. The scouting process should be rigorous and should scrutinize the following criteria:

  • Transparency: Ask the companies that you’re vetting to provide a price list and quote for their services. Knowing your expenses in advance will allow you to determine which trustees cover your financial criteria and will spare you from any unwanted surprises, such as unmentioned taxes. Discard every custodian that isn’t willing to disclose their rates and fees with you.
  • Flexibility: Go with a company that is ready and willing to cater to your individual needs. Flexibility is of paramount importance, as it will give you the comfort of mind that you can access your account and its content when you see fit instead of having to comply with rigid rules set by the trustee. 
  • Track record: Consider only companies with an exemplary reputation and outstanding track record. Go through reviews, comments, and testimonials from objective third parties such as private, federal, and state agencies, as well as current and former customers.
  • Qualifications: You should entrust your assets to a company that has the appropriate and necessary licenses, insurance, bonds, and registrations. You should also verify the validity and legitimacy of all the information and documents that will be presented to you.      

Costs

Owning a physical gold IRA account comes with the following expenses:

  • Seller’s Fee: The markup of gold depends on several factors such as the type of the gold item (proofs, coins, bullion, etc.), vendor, purity of the metal, and more. It’s a one-time expense that every investor must pay to obtain IRS-approved gold or other types of precious metals. 
  • Account Setup: Each account owner must pay a one-time opening fee. Every institution has its own fee, which is usually higher than standard setup rates since not every company deals with precious IRA metals. 
  • Custodian Fee: Custodians charge their clients a yearly fee, as well as different transaction taxes. 
  • Storage Fee: Precious metals can be stored only in qualified facilities, which charge a monthly fee for their services. 
  • Closing Fee: There is a tax that investors must pay to close their account in case they sell precious metals to a third party. The sum of the fee is determined by the current rate of the sold precious metals, which at times, can lead to a significant loss in capital. 

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