Once your gold IRA account is open and funded, you can select and buy investments to put in it. Many companies have account representatives that can help you choose the right gold or other metals. You should you’re your options on your short- and long-term objectives, as well as your risk tolerance and time frame. You should also make sure that you buy metals that the IRS allows in a self-directed gold IRA account.
For instance, if you will only be making a small investment, then gold coins could be a good option for you. But like with other types of investments, not all gold coins are exactly alike.
Because some coins are more valuable than others, you should work with a gold company specialist to narrow down which coins may be best, based on your specific investment parameters and objectives.
You cannot take delivery of the gold and other precious metals you purchase for your IRA account. These metals must be stored in an approved depository. While your IRA custodian may recommend an approved storage option, you have the right to choose where your metals will be stored.
Gold storage options for your IRA investments:
- IRS-sanctioned storage vaults
- Offshore storage vaults
IRS-Sanctioned Storage Vaults
The IRS only allows the physical gold in IRAs or retirement accounts to be stored in certain depository vaults. Storing gold this way can help to reduce the chance of theft or fraud. IRS-sanctioned storage vaults include the:
- Delaware Depository
- Brinks Security
- HSBC Bank USA
- JPMorgan Chase Bank North America
- Scotia Mocatta
- CNT Depository
Offshore Storage Vaults
You may also store your IRA gold in an offshore storage vault. After the U.S. government confiscated physical gold back in the 1930s, some investors felt that storing their gold and other precious metals outside of the United States was a better alternative.
Knowing how your physical gold is stored is important. For instance, if the gold is “comingled”, your metals are stored with metals that also belong to others, even though each person’s metals are separated, or segregated. Allocated storage refers to gold that is still under your name, but that is stored away from other investors’ metals.
The Role of the Gold IRA Custodian
Trust companies or custodians hold self-directed IRA accounts – including gold IRAs. An IRA custodian is a financial institution that holds your account’s investments for safekeeping and sees to it that all IRS and government regulations are adhered to as all times.
These companies act as a fiduciary on behalf of the account. Self-directed IRAs require a different type of custodian than typical traditional and Roth IRAs because self-directed IRA accounts allow for “non-traditional” investments that span beyond stock, bonds, and mutual funds.
Regular IRA Custodians
If you have a regular IRA account (i.e., not a self-directed IRA), there are a number of financial institutions that you can use as a custodian. These can include:
- Insurance companies
- Mutual fund companies
- Brokerage firms
Self Directed IRA Custodians
For self-directed IRAs, though, it can be a bit more complex. In this case, there are three types of providers for self-directed IRA accounts. These are custodians, administrators, and facilitators.
Administrators and facilitators act as intermediaries between IRA account holders, and a partner custodian that holds the assets. The IRA approves and authorizes which custodians can hold assets for self-directed IRA accounts. So, when you open a gold self-directed IRA account, it is oftentimes recommended that you affiliate with a custodian.
Some of the self-directed IRA custodian’s responsibilities include the following:
- Setting up the account
- Producing and delivering periodic account statements
- Accepting contributions
Once you have established a gold IRA account with a custodian, you may buy and sell gold and other precious metals from the dealer of your choice.
Choosing the Right Custodian for Your Gold IRA
Banks, brokerage firms, and the other institutions listed above could serve as the custodian for your gold IRA account. But in this case, it is oftentimes best to stick with a custodian that is well-versed in the IRS rules and regulations self-directed IRA accounts, as well as the potential penalties that you could incur if you violate any of these rules.
Some of the best options for a self-directed gold IRA custodian account include those that offer:
- A wide selection of investments
- Low fees
- Good customer service
- A user-friendly website (and one where you can monitor your investments and conduct transactions online)
- Knowledge and experience with consolidating IRA accounts
- No restrictions on your investment options (other than those that are set by the IRS)
How to Choose a Gold Dealer
When shopping for most any “high ticket” items, like a car or a new computer, most people will shop around and compare their options (as well as the prices). The same should hold true when you are narrowing down which gold dealer to use for your investments.
In this case, there are several factors to consider, such as:
- Experience – Experience is a key criterion to consider when deciding on a gold dealer. So, you should make sure that the dealer has been in business through different market environments. The company should also have seasoned employees who can answer your questions about investing in gold and precious metals.
- Reputation / Due Diligence – A good reputation is essential when choosing a firm to buy and sell investments through. So, before you do business with any gold or precious metals dealer, make sure that you research its background and manner of doing business.
- Better Business Bureau Rating / Grade – You can get a lot of information about gold dealers (as well as other companies) through the Better Business Bureau. Here you can find details on complaints (if any), as well as whether or not the company has resolved any negative issues.
- Customer Reviews – You can find a lot of good and bad information on the Internet. This includes reviews from the customers of all kinds of businesses. Customer reviews can be helpful. Keep in mind, though, that not all customer reviews are authentic. Some precious metals companies pay review companies to contact customers and solicit reviews from them. These reviews are oftentimes a few words, such as “good deal” or “positive transaction.” Therefore, make sure that you look for lengthier reviews that discuss specific details about a customer’s transaction.
- Prices – Even though gold (and other metals) have a definitive spot price, some dealers may charge more than others, based on their markup. So, it is worth your time to check with several gold dealers and compare prices before you buy anything from them.
- Policies on Buying Back Gold – When you buy gold and other precious metals, at some point you may want to sell your investments. Most gold dealers have a “buy back” policy, as well as the prices they will pay for various metals. Make sure that you familiarize yourself with this, as well as any other “fine print,” like the terms and conditions you must meet.
- Authentication of Metals – You should also check the dealer’s authentication process to ensure that the gold you are buying is authentic. In some cases, gold products will be low quality and have a false higher fineness marking. The product could also be gold flakes filled in with a lesser quality metal underneath. You should know if the gold is real before you move forward with a purchase.
Items to Consider Before Opening A Gold IRA or 401k Account
To help you find the right gold IRA or retirement account for your needs, there are some additional items you need to consider, such as the:
- Minimum purchase amount
- Selection of investments
- Reputation of the custodian
- Charges and fees
Minimum Purchase Amount
You need to know if a gold company requires a minimum purchase amount. Plus, if you are investing in non-tangible items, such as gold ETFs (exchange traded funds), you may also have to meet a minimum purchase requirement that is associated with the actual investment vehicle. For instance, you may have to buy at least one share of a mutual fund or stock.
Selection of Investments
When setting up a gold IRA account, you should do so with a firm that offers a good selection of investments. This can help you to keep the IRA account more diversified. Most gold and precious metals dealers offer a range of items to invest in, including:
The IRS only allows certain types of gold to be held in an IRA account, so it is also important that you choose a company that offers IRA-approved precious metals.
Reputation of the Custodian
There are many self-directed IRA custodians to choose from in the marketplace. But they all won’t be right for you and your specific investing needs. Likewise, some of these companies will not have a positive reputation for conducting transactions and keeping the best interest of their clients at heart.
So, make sure that you conduct a thorough review of any gold IRA company and/or custodian you are considering. You should also verify that the company has a good reputation for expertise and accuracy with self-directed gold IRAs.
You should also look for gold IRA companies that have a variety of professionals on staff who can look at your unique situation, goals, and objectives from all angles, and then make recommendations for your account.
Before moving forward, you should ask some important questions about the self-directed IRA custodian, as well as an advisor you may be working with on your gold IRA investments. You should ask some or all of the following:
- What licenses and credentials they possess.
- How are they regulated.
- How are they insured.
- How fast can they get your account up and running and ready to buy gold and/or other precious metals.
- Whether they take a conservative or an aggressive approach with their investment recommendations.
- Whether you will be working with their headquarters office or a branch office / franchise.
- Whether they require a minimum account or investment amount.
- Whether they offer brokerage or other similar services.
- If they have on-site metals storage or they send the items to an off-site depository.
- How many years of experience they have in this particular investment field.
- If they have competitive prices on their gold and other investment offerings.
- If they provide great customer service that allows you to ask – and have answered – any questions that you have about your IRA account and the allowable investments in it.
- How many clients the company currently has (and whether this number is more or less than the number of clients they had a year ago).
- Whether the company has legal counsel on staff.
- If they use customized or boilerplate operating agreements.
- Whether they offer regular communication in order to keep you informed about your account and your investments.
- Whether they provide live customer service representatives who are knowledgeable about the particular gold and precious metals you are investing in (or that you’re considering investing in).
When deciding on the right self-directed IRA custodian, you should also review any customer reviews and testimonials. This can give you a more in-depth idea of whether the company does what it says it will do in its marketing materials.
You may also want to search on Google and see if a gold company that you’re considering has been in the news – and if so, was this news good or bad? You should check out the company’s information on the Better Business Bureau’s website, as well as the website of the Business Consumer Alliance. These websites can provide you with details about any complaints that have come in, as well as whether the issues were resolved.
Charges and Fees
As with most other types of investments and accounts, you will be charged various fees when you invest in a gold IRA. For example, brokerage firms and precious metals dealers will usually charge a commission when you buy and when you sell precious metals. These commissions usually run between 2% and 5% above the spot price of gold.
Some of the other charges and fees you may run into with a gold IRA include the following:
- Setup fees. Gold and precious metals IRA firms will usually charge a one-time processing fee for setting up your account. This fee will oftentimes range from $50 to $100.
- Annual account maintenance fee. You may also incur an account maintenance fee each year. Depending on the company, this charge may be between $50 and $300. In some cases, the gold IRA company may waive this fee for the first year.
- Storage and insurance fees. If you are investing in tangible gold and other physical precious metals, you will have to store and insure these items. The depositories that hold your gold will oftentimes charge a yearly fee to the self-directed IRA administrator. The administrator will then pass the cost along to you, the investor. Most gold IRA account holders pay between $100 and $300 per year for storage and insurance.
You may run into some other miscellaneous fees, as well, such as wire transfer charges when you open the IRA account. So, make sure that you inquire about any charges before moving forward with opening and investing in a gold IRA account.
Knowing what to expect with charges and fees can help to remove any unpleasant surprises later. You should also research the charges from several different gold IRA companies before you commit to one.
That way, you will be able to compare the various prices. If you know this information ahead of time, you will understand how much these fees could impact the overall investment return in your account.