A Gold IRA, also known as a Precious-Metals IRA, is an Individual Retirement Account where actual physical gold, or another approved precious metal, is held in custody for the IRA account beneficiary. A Gold Roth IRA operates the same as a standard IRA, but instead of paper assets, such as cash, stock and bonds, it holds gold bars or coins.
Investors commonly use precious metals, like gold, to diversify their portfolio as long-term hedges against inflation. A Precious-Metals IRA is typically a self-directed IRAs, meaning a type of IRA where the forms of investments are chosen by the account holder. A self-directed Gold IRAs can be set up as several different types of retirement accounts, like a Roth IRA, SIMPLE IRA, SEP IRA, HSA, a Thrift Savings Plan or a 401(k).
In addition to gold, silver, platinum and palladium may also be held in a Gold IRA, provided the metals are an IRS-approved product, such as bars and/or coins. However, since gold is typically the most common of the four metals, the term “Gold IRA” is most often used as industry vernacular to refer to a retirement account that holds any combination of the four precious metals. Aside from Gold or Precious-Metals IRA, other terms, such as “Silver,” “Platinum,” or “Palladium IRA” may also be used. Currently there are a variety of precious metals which meet the IRS’s minimum-purity standards for holding in a Gold IRA account.
Gold Bars vs Coins
There are generally more advantages to having gold coins, as opposed to bars, in a Gold IRA. Coins are usually easier to liquidate, as bars are harder to sell because of the higher price of a whole bar and coins are easier to move because, compared with the weight of a full bar of gold. However, while coins generally have a higher commission rate gold bars more accurately reflect the current-market price of the metal.
The IRS code requires the approved precious metals to be kept with a custodian. Some IRA Trustees have dedicated in-house facilities to keep the physical precious metals, whereas others employ a third-party depository.
The laws surrounding taking distributions from a Precious-Metals IRA are typically the same as for distributions from a non-Precious-Metals IRA. The holder of the account is allowed to liquidate their Gold IRA for cash or assume physical possession of the actual metals, but both actions are equal to taking cash IRA distributions and the IRS will require taxes be paid upon withdrawal, as well as a penalty of up to 25 percent.