Gold IRA ☛ Don’t Get One (Until You Read This!)
A good number of people are now moving their retirement accounts to precious metals by using the gold IRA investment vehicle. As wonderful as this may be, the question is; will gold IRA investment work out well for you?
Before we go too far, a physical gold IRA is an investment vehicle that allows an investor own physical precious metals like gold, silver, palladium and platinum together with paper investments like stock and bonds and so much more.
The Gold IRA is was enacted by Congress way back in 1997 and was spearheaded by Edmund C. Moy, a key figure in United States Mint and Fortress Gold. During his time at these two organizations, United States gold and silver output was the largest in the world.
However, not every type of gold is accepted into an IRA. It must scale through certain requirements. In the words of Moy; “The precious metal coins or bars must meet IRS fineness standards and must be held by the IRA trustee instead of the IRA owner.
The gold must be stored in an IRS-approved depository”. So for an IRA, storing up gold at home is is not allowed. It has to be managed by accredited companies. Just like other investments, taxation and distribution laws are also applicable to Gold.
Why Get a Gold IRA?
Gold investment serves as an excellent investment diversification tool. It is for this reason that investors go for it. Another unique feature of gold is that while stocks and bonds falter during times of inflation and deflation, the value of Gold tends to increase over the long term. Thus gold investment comes with little risk when compared with paper assets, thus making it an excellent investment portfolio for retirees.
How to Get a Gold IRA?
Back in 1997 when Moy was at Fortress Gold, only a very few investors opted for gold IRA investment, due to the complexities involved. Moy tells us “You must find a trustee or custodian for the IRA along with an approved depository. Then, you need to buy the approved gold or other precious metal and have it transferred to the depository in a way the custodian can account for it.”
Investors Run to the Gold-Backed IRA
But the trend has changed since the economic slump of 2008, as many investors are now running to Gold backed IRAs. As it stands, many companies are now involved in precious metals IRA provision and the whole process has become very much simplified.
Physical gold IRA and Silver IRA uptake is growing at a very fast pace. Inflationary tendencies of the Federal Reserve and different geopolitical risks have also lent a hand in making an IRA in physical gold more popular.
How to Find the Best IRA Custodian?
John Johnson a veteran investor and the president of Goldstar trust with headquarters in Texas, shares some insights on how a gold backed IRA works. As an investor you will need the services of a broker and a custodian.
Whereas the broker buys the gold, the custodian manages your account. Custodians could be a bank, credit union, trust company, brokerage firms or just a savings and loans organization. A custodian needs to be approved by Federal or state agencies in managing gold IRA accounts.
It is important to note that it is not at the custodian’s discretion to pick a dealer for a client. This responsibility is shouldered by the client. However, these custodians have links to numerous dealers spread all across the country. So getting some contacts from them isn’t a bad idea. In the same vein, metal dealers can also provide links to some trusted custodians as well. Johnson says “However, consumers are always free to search for custodians on their own.”
There are several gold backed IRA options an investor can choose from, but where the trouble lies is selecting the companies that will manage your assets. Due to the complexity of the process, brokerage firms rarely offer any sort of help. Moy shares some insights on what to look out for in selecting a company
Evaluate all costs including hidden charges to avoid unpleasant surprises, before making an investment move.
Check out the company’s reviews from Authority figures like BBB (Better Business Bureau) and BCA (Business Consumer Alliance). Moy suggests seeing what other clients are saying about the company. Complaints filed against the company need be taken into consideration as well.
Every client has his or her own unique needs. So any company you select needs to meet your needs uniquely instead of “generally”.
Dealing with companies that don’t fulfill all requirements is risky. Licenses, registrations and insurance covers have to be up to date. If not, it is better you check out the next company.
Fortunately we've done a lot of the hard work and research for you.
What's a “Checkbook” IRA?
There is another option available to investors. It is known as “checkbook IRA” and it saves an investor the trouble and cost of a custodian. However, the complications in opening up a checkbook IRA is stacked high to the heavens.
The investor must be an LLC, own a business checking account, authorized to buy Gold eagle and minted coins issued out by US treasury. As it stands now, checkbook IRA is still being reviewed by the IRS, so it is important to do proper consultations before opening one to escape avoidable heart aches.
Are Gold IRAs Safe?
Are gold IRAs safe? It is very unlikely to find an investment that has zero risk. The gold backed IRA is no exception, as it also has some risks. Moy tells us “The price of gold can go up or down and have volatility. No one can accurately predict its future”.
Even in the face of this risk, an IRA in physical gold is still a smart investment choice, especially for retirees. In its 5,000 years as a value storage media, its value has never been zero. Treasury bonds can plummet, the price of dollar has declined steadily but gold is at most times stable.
Moy emphasized the importance of having a balanced investment portfolio. This is because should your gold IRA investment take a downward spiral, paper investments tends to rise, thereby creating a balance in your investment portfolio.
Despite its stability, a good number of risks are associated with purchasing gold. Like every other item, gold can be stolen, and the chance of this happening is really high due to the value of the metal.
No matter how safe a deposit can be, a motivated individual can always break into it. It is for this reason that IRA deposit banks are mandated to be covered by insurance. In rare cases, the stealing is not done by an outsider but within. Some fraudulent custodians have been known to steal from their clients. To avoid this risk, go for companies whose financial operations have an insurance cover and who have a long and stable track record.
Gold IRA Conclusion
There are some investments classified as alternative investments and an IRA in physical gold is one of them. Such investment portfolios can’t be traded publicly and only specialized individuals can value such investments.
In the quest for high ROI, some investors fail to see the blind spots in Gold Investments. Insufficient research and consultation can lead to a collapse of investment. So before opening a gold IRA investment, read as many materials and guides out there, and consult with experts.
Now you've read our gold backed IRAs guide, we hope you're better equipped to make a decision as to which is the best gold IRA custodian for you. So we suggest you take out time to make your own investigations and research. Requesting their free kits is always a good way to start.
John Wilson, Editor
eGoldAdvisor Editor is John Wilson. John is an accomplished online and offline businessman and investor. He has significant personal holdings of precious metals and also real estate.
Some time ago, John came to the painful realisation that the government does not have our best interests at heart; least of all our wealth. Read more...