A Gold IRA is an Individual Retirement Account that allows investors to hold hard, physical assets in their retirement portfolios. Typically, both traditional and Roth IRAs can hold only cash, bonds, and stock.
The Taxpayer Relief Act of 1997 broadened the types of investments allowed in individual retirement accounts to include certain types of precious metals. These IRAs are called “self-directed” or “alternative-asset” IRAs.
Not all precious metals are allowed. Usually, they are limited to gold, silver, platinum, and palladium. Tax law also specifies the purity standards for each metal. For example, the American Gold Eagle coin is an
Best Way to Invest in Gold
Investors became more interested in gold IRAs After the financial crisis in 2008, which brought about a recession.
In October of 2007, the stock market hit its pre-recession high. Then by March of 2009, the market lost 50 percent of its value, and investors’ retirement portfolios reflected this significant drop in value. Gold prices move in the opposite direction of stock prices, so gold IRAs became a reasonable hedge against inflation.
These IRAs are useful for portfolio diversification and for anyone who is concerned with economic and world news that might cause another stock market drop.
All the Ways to Invest in Gold
1) Buy Gold Coins, Bars or Bullion in a Gold IRA
You can buy physical gold from a variety of gold and precious metals brokers who sell the gold in the form of coins, bars and bullion.
While owning actual gold sounds thrilling, storing it in your home can be a safety issue if anyone learns you have the gold in your possession. A relative or friend may mention to others that you have gold in your home, which can lead to theft.
Gold IRA companies securely store your gold for a fee or a small annual fee. Look for a dealer in our List of Top 10 Gold IRA Companies offering free delivery and compare offers from multiple brokers to see if you can reduce costs and increase your profits when you sell the gold.
2) Buy Gold Exchange Traded Receipts (ETR)
Another way to own physical gold is by investing in Gold ETRs from the Canadian Gold Reserves Program. You can trade Gold ETRs on the Toronto Stock Exchange (TSX) through several U.S. brokerages in Canadian (MNT) and U.S. (MNT.U) dollars.
The gold receipts are proof you own physical gold bullion held at the Royal Canadian Mint. You pay a monthly fee equal to an annual rate of 0.35 percent. The purity of the gold an ETR represents is guaranteed to be at least 99.9%.
You can redeem your ETRs for gold bullion or cash once a month, and the minimum redemption is 100,000 ETRs.
However, there’s no need to take possession of the gold with ETRs. When you’re ready, you can sell your certificates on the Toronto Stock Exchange.
3) Invest in Gold Stocks
When you buy stock in a gold company, you’re buying into a gold mining or processing operation rather than gold itself. The company is profitable when it sells extracted gold for a higher value than the cost of the mining operations.
Gold stocks can be a great way to indirectly take advantage of rising gold demand and prices. But you must practice due diligence when selecting gold stocks. Two things to consider when picking gold stocks are:
- When considering gold stocks, buy into financially stable, quality companies with contracts for future mining projects. You can also look into stock sold by companies involved in processing gold, which may have somewhat less potential for volatility.
- Gold stocks usually follow gold prices but can regress while gold prices climb when the economy falters.
4) Buy Gold ETFs
An exchange-traded fund, commonly known as a ETF, is a basket of stocks sold on the stock exchange throughout the day. A Gold ETF may be backed by physical gold assets or could track the price of gold using futures.
Many Gold ETFs hold derivatives and options, with gains taxable at the collectibles 28 percent rate. The ETF is the one gold investment you may not want for the long term. The fees eat usually away at profits, depending on the ETF.
Given the range of investments a Gold ETF may hold, take the time to understand the ETFs you’re interested in, and consider taxes and past performance.
5) Gold Fund Investing
Gold mutual funds may invest in any mixture of physical gold assets, precious metals processing stocks, other precious metals or gems, and domestic and foreign gold mining company stocks.
Determining which gold fund to invest in takes a bit of research so you can choose a fund that meets your financial objectives.
Some gold funds hold almost all physical gold and effectively track gold prices. Some focus on emerging gold markets and can be lucrative over time. Others hold a percentage of investments in diamonds, silver and other precious metals and minerals.
Choose a gold fund with a level of foreign company exposure you’re comfortable with, and take a look at past performance of the mutual fund compared to the overall market.
Buying shares in a gold fund can expose your portfolio to the benefits of investing in gold at a low cost. Look for no-load funds or low-load funds with expense ratios under one percent.
6) Buy Gold ETNs
An ETN is an exchange-traded note, and this instrument combines some aspects of ETFs with bond securities.
Gold ETNs may track a gold index or may move opposite of the value of gold, which is useful for the contrarian investor.
Like buying non-interest bearing bonds, a bank issues Gold ETNs with a maturity date. When the ETN matures, the bank pays the investor back with a profit depending on gold futures.
With great risk comes great reward, and Gold ETNs can pay a handsome return. However, you also can lose your entire investment.
What is a Rollover?
If you have a retirement plan such as a 401(k) or 403(b) through your employer and you leave to take another job, you can roll the money you have in your current retirement account or IRA over into another IRA.
The same rules apply if another IRA offers better investment opportunities than the one you have. You must follow certain rules and regulations. The same is true for a gold IRA, but there are even stricter regulations to follow
Rollovers can occur under one of three conditions:
- The sponsoring company substantially changes its retirement plan
- The sponsoring company changes the custodian of its retirement plan
- The employee terminates employment with the sponsoring company
How Are Rollovers Done?
The IRS stipulates three ways to complete a rollover.
- Direct Rollover: You can ask your retirement plan administrator to issue a check directly to the retirement plan or IRA to which you wish your money rolled over. Using this method assures that there will be no taxes withheld from your rollover.
- Trustee-to-Trustee Rollover: If you are rolling over your IRA, the trustee of the IRA can facilitate the rollover to the trustee of the other IRA. There are no taxes withheld using this method.
- 60-Day Rollover: A check can be issued directly to you for the amount of your rollover. If you invest it in another IRA or retirement plan within 60 days, no taxes will be withheld.
Some investors choose to roll part of their retirement savings into a gold IRA rather than all their savings. In this case, a portion of the retirement savings will be subject to the special gold IRA rollover rules.
How Are Gold IRA Rollovers Different?
Gold IRAs can either be traditional or Roth IRAs. The first thing that a potential investor must decide is whether they want to invest in the actual physical gold or in gold company stock, a gold mutual fund, or an exchange-traded gold fund.
If the investor decides to invest in the actual gold, it must be gold coins or bullion that meets the standards of the IRS regarding purity. The gold must be held by a custodian that is IRS-approved and should not be held in any type of home storage.
Rolling over retirement funds to a gold IRA is simple. You have to first establish a self-directed IRA which allows you to invest in a wider range of assets.
Then, you need to choose a custodian to create and administer your self-directed account. The custodian you choose must have the facilities to store the physical gold for you. And it should have been approved by federal and state agencies to provide asset custody services.
Finding the Best Gold IRA Company
Choosing a gold IRA custodian is important since the broker is tasked with choosing gold that meets the standards of the federal government for inclusion in an IRA. You want your broker to have, at least, the following characteristics:
- Qualifications: The broker should have all the appropriate licenses, bonds, and insurance to protect your investment.
- Reputation: The broker should have an excellent reputation based on the word of previous clients and organizations like the Better Business Bureau. You might want to look at consumer reviews or number of complaints filed.
- Responsiveness: The broker should be responsive to your needs as an investor. They should be well-versed in the tax law regarding IRAs and Gold IRAs and be willing to work with you to be sure you are meeting the requirements.
Invest in Gold Wisely
There are ways to invest in gold whether you are looking for a hedge against the economy, growing your retirement portfolio, or possibly getting in on a short-term payoff.
Regardless of how you choose to invest in gold, be prepared to do a few hours of research or consult with a financial advisor to ensure your gold investment method compliments your financial goals.
Bottom Line
Rolling over your investments into a Gold IRA is a popular option for people looking to avoid the uncertainty of the stock market. If you’re unsure about where to start, read our guide on the best Gold IRA companies to help you get started in your decision-making process.
Do you have any questions on how a gold IRA is the best way to shield your portfolio from inflation? Ask below!
What an informative article! I had been wondering how to switch from a cash 401k to investing in gold! And it definitely makes sense to have your gold somewhere safe. I can’t imagine even storing large amounts of cash around the house, let alone anything like precious metals! But this topic is something I’ve thought about very seriously as it’s uncertain what’s going to happen to the value of the dollar. This article was so in depth and so helpful in answering my questions!
Hello Stormy and thank you for dropping by! If you are considering rolling over your 401k to a gold IRA, you are really in the right place. You do not have to store physical gold in your house when you have a gold IRA. You rollover your 401k to a gold IRA with a trusted gold IRA custodian who will store your physical gold (and/or other precious metals) at a secure depository location of your choosing. The only catch is that you should research the best gold IRA companies and choose to work with the best one. I’m glad I can answer your questions, Stormy! I hope to see you around more.
Hello David, I must say that this article is very helpful and informative. I was thinking for some time to invest in gold stocks but honestly, I was a little skeptic as it also brings a not so small risk. Your article helped me a lot to understand some important things which are crucial for proper investing. I will definitely put my hands on it and hope for the best.
Hello Daniel and thank you for sharing your experience with us. Indeed, gold stocks may be one way to invest in gold and it may be somewhat interesting to learn what profitable gold mining companies they are but nothing beats holding actual physical gold in a tax-exempt gold IRA. I’m glad you were able to learn some helpful things from my article. Thank you for dropping by!
Hey
It was a very interesting article. Didn’t know there were so many ways to invest in gold. Although I’m not a resident of Canada, I’m sure some of these many options might be available here in India too. I approach Gold more as security than investment. Correct me if I’m wrong. Well, I really like the idea of Gold ETRs, will look them up here.
Thanks for sharing.
Hello Shashwat and thank you for the comment and sharing your own experience with investing in gold with us. ETR’s may be one way to invest in gold but nothing beats having physical gold to shield your portfolio from the hazards of the financial market. Thank you for dropping by!
I’m always looking for some investments opportunities and as a freelancer I also have to start thinking about my retirement, although I’m still quite young, you never know how retirement will be looked upon financially. So investing in gold looks like a good option. A saving account these days doesn’t generate a lot of money any more as well. Thank you for the information, I’m for sure gonna look deeper into it.
Hello Virendra! I’m glad that you are considering retirement now because you can have all the aspects of retirement and investment with a gold IRA. I’m glad you were able to learn much from the article! Thank you for dropping by!
Thank you for this very informative post about investing in precious metals. The stock market is at incredibly high levels and to us it makes excellent sense to have some of your holdings in gold and other precious metals.
I was not aware that there were so many alternatives to how one could gain exposure to physical precious metals and still keep capital in investment accounts with tax benefits. I thought the only way was through stock investments with mining companies which can be a very volatile option. Thanks again, we will be exploring some new options to protect ourselves from inflation.
Hello Judy and I’m glad that you learned something new through my article! Yes, many people choose to invest in gold through gold mining company stocks, but nothing beats owning physical gold to shield yourself from the unknown factors of the financial market. I would highly suggest you consider a gold IRA for your portfolio to protect yourself from inflation. Thank you for dropping by and sharing your experience with us!
Hi there, David.
Whilst Gold looks a great option to gain some Tax relief, can you tell me about the other 2 precious metals you have mentioned?
Is Silver a good investment and will this metal increase in value and reasons why?
I have never heard of the metal, Palladian before.
Can you tell me a little more about this metal and is Palladian classed as a precious metal?
Looking forward to your reply, Jeff.
Hello again Jeff and thank you for the questions! Silver is also a good precious metal to invest in – it continues to rise in value because it has intrinsic value in many cultures as an item of high worth and esteem. You can’t expect cultural worldviews to change drastically (unless a sudden mind-control brainwashing tactic from an unknown organization makes them forget all their common values which seems very unlikely). That’s why silver is a good long-term investment. Palladium, along with platinum, are the two other precious metals that precious metals investors look for. This is because of their use in many other industries, along with their high esteem in jewelry that makes these precious metals have high esteem and value. Thank you for the questions, Jeff! I am glad I can answer them for you.
This is great info, and I am leaning more towards investing in a Gold IRA these days. I’ve been thinking about starting a Gold IRA account and just investing in it for the next 15-20 years, but I’m not 100% yet. There’s still so much I need to learn about it. Like the article says, it might be best that I speak with a financial adviser.
Hello Nate and I’m glad that you’re considering a gold IRA! Here is my page that will give you more information about it as you consider your future retirement plans. Thank you for dropping by!