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Invest in Gold Coins
When most people think of an IRA, they picture a Retirement account holding Stocks, Bonds, and Mutual funds. This is the most common type of IRA, but there is another type.
Self-directed IRAs allow tax-advantaged Investments in asset classes like Real Estate, startup companies, and Precious metals.
A Gold Coin IRA is a self-directed IRA (SDIRA) that holds physical Precious metals like Gold Coins and bars. These Investment vehicles are also referred to as “Gold IRA”, “Silver IRA”, and “Precious metals IRA” because they can hold any of the IRS-approved Precious metals: Gold, Silver, Platinum, and Palladium.
Gold IRA
Investors are usually attracted to Precious metals when they feel some insecurity or anxiety about their existing financial situation.
Many investors diversify their retirement funds into Gold and Silver after becoming uncomfortable with over-inflated stock markets and the financial shenanigans played on Wall Street.
Paper Investments like Stocks and Bonds all have counterparty risk which means that other parties can default on their contractual obligations, causing the investor to lose all or part of their Investment. Significant examples of these losses are the Enron scandal in 2001 and the Bernie Madoff scandal in 2008.
With physical Precious metals there is no counterparty risk because there are no counterparties.
In addition to escaping counterparty risk, Investors are moving into Precious metals because of rapidly rising Inflation, rumors of a Global Economic Reset, and mounting tension between the world’s super-powers.
The ideal Precious metals Investment involves taking personal possession of the metal and storing it in a home safe, burying it in the garden, or storing it in a nearby vaulting facility. Unfortunately, this solution doesn't work for tax-advantaged Retirement accounts because the IRS doesn't allow access to that money without charging substantial penalties and taxes.
There is only one way that investors can use their tax-advantaged savings to purchase Precious metals and that solution is a self-directed IRA. Let's cover the history of SDIRAs so we understand that they are a legitimate, IRS-approved Investment vehicle.
ERISA
IRAs were created as part of the Employee Retirement Income Security Act of 1974. This sweeping tax law provided new solutions for both tax-deferred and tax-exempt investing. Self-directed IRAs were introduced with ERISA but it wasn't clear at the time which asset classes could be held in an SDIRA. In practice, most investors who took advantage of SDIRAs used them to hold Real Estate.
Taxpayer Relief Act
In 1997 the Taxpayer Relief Act clearly defined which assets could and could not be held in a self-directed IRA. For the first time ever, investors were allowed to purchase and hold physical Gold and Silver using their tax-advantaged savings. In 1998, the law was expanded to include Platinum and Palladium.
To reiterate, one of the primary Gold IRA benefits is that these unique Investment vehicles allow investors to protect their tax-advantaged retirement savings with the security of physical Precious metals.
Gold IRA rollover
The IRS allows investors to move their retirement savings from one account to another and these moves are referred to as "rollovers" and "transfers".
Rollover
In a Gold IRA rollover, you move money from an existing Retirement account (IRA, eligible 401k, 403b, TSP, etc.) into a self-directed IRA where you can purchase and hold physical Precious metals. The funds are wired directly from your existing account to the Gold IRA account.
Transfer
In a transfer the funds from your existing account are sent to you and then you forward some or all of that money to the Gold IRA account. You have 60 days to complete this transaction or the IRS will assess an early withdrawal penalty and income taxes on the withdrawn funds.
These are the key points to keep in mind regarding rollovers and transfers:
You can only move retirement savings one time in any given tax year
There are no taxes or penalties for performing a Gold IRA rollover or transfer, as long as the transfer is completed within the 60 day window
A transfer must be completed within 60 days or your withdrawn funds will be subject to an early withdrawal penalty and income taxes
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Gold Roth IRA
Precious metals IRAs can be established with either before-tax (tax deferred) or after-tax (tax-exempt) money.
An IRA established with after-tax money is known as a Gold Roth IRA. Pre-tax money is used to establish a traditional Gold IRA.
Capital gains on Precious metals in a Gold Roth IRA are tax free while capital gains in a traditional Gold IRA are taxed as regular income.
Investors typically use a Roth IRA when they think their taxes will be higher in retirement than today.
A Roth IRA may also make sense if the retirement funds could be needed before age 59 ½. The money in a Roth Gold IRA has already been taxed so distributions can be taken without penalties.
A Traditional Precious metals IRA appeals to Investors who expect their tax rate to be lower during retirement. They set aside pre-tax income today for distribution at a (hopefully) lower tax rate in the future.
Gold IRA vs physical Gold
The key difference in a Gold IRA vs physical Gold is that tax-advantaged funds are used to purchase metal in a Gold IRA while only non-tax-advantaged funds can be used to purchase physical Gold that is held outside the financial system.
The ideal Precious metals Portfolio begins with an Investment in physical Gold and Silver purchased outside of any IRS-approved Retirement account. This metal is stored locally where it can be easily accessed. Vaulting facilities are available in larger cities but most investors prefer to keep their Precious metals in a home vault or bury them in the garden.
After acquiring an adequate supply of metal for personal possession, investors with tax-advantaged Retirement accounts can purchase and hold additional physical Gold and Silver by opening a Gold IRA.
Home storage Gold IRA
The IRS requires that a third-party Custodian holds the assets in any IRA. This rule applies whether the assets are Precious metals or Stocks, Bonds, and Mutual funds.
A home storage Gold IRA (also known as a Checkbook IRA) attempts to get around this rule by forming an LLC or other legal entity to act as the IRA Custodian. This Custodian (which is actually you acting through the LLC) stores the IRA metal in a safe in your home.
There are two risks with this strategy.
First, a custodian has to meet a set of lengthy legal requirements. If the LLC doesn't comply with these requirements, the IRA will be invalid.
Second, there is a temptation to move assets in and out of a checkbook IRA without making properly documented contributions and withdrawals. Violating regulations or being sloppy with documentation may cause the IRS to declare the Retirement account invalid.
If the IRS declares the home storage Gold IRA invalid the investor may be subject to penalties, back taxes, and interest for the years in which the IRA didn’t comply with IRS regulations. Several investors have tried to fight the IRS on this issue and the US Tax Courts have always ruled in favor of the IRS.
Gold IRA tax rules
There are just a few IRS-mandated Gold IRA tax rules to keep in mind:
When transferring funds from one Retirement account to another the Investor has 60 days to complete the transaction without tax consequences.
Investors can have more than one IRA at a time. Opening a Precious metals IRA has no affect on existing IRAs or other Retirement accounts.
Investors can contribute to more than one IRA in any given year. For example, a 50-50 allocation strategy would place $3,000 per year into an IRA holding Stocks and Bonds while another $3,000 went into a Precious metals IRA.
The IRS has requirements about the Precious metals held in IRAs. Bullion bars and Coins must be at least 99.5% pure, with the exception of American Eagle Coins which are only 91.67% pure. Bars and Coins must be purchased from IRS-approved refineries and government mints.
Gold, Silver, Platinum, and Palladium can all be held in a Precious metals IRA.
Distributions can be taken as cash or physical metal.
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Gold IRA fees
The fees to maintain a Gold IRA are a little higher than the fees on a traditional IRA holding Stocks, Bonds, and Mutual funds. The difference is to cover the cost of secure storage and insurance for the physical Precious metals in the Gold IRA.
Let's compare a $50,000 IRA holding Mutual funds against the same size Gold IRA.
IRA with Mutual funds
Investment management companies charge $45 to $175 per year as a maintenance charge on a $50,000 IRA. The fee charged depends on the company and how much advice they provide for the account.
Mutual funds charge 0.2% to 2% per year to cover expenses. It doesn't matter whether the Fund is front-end load, back-end load, level load, or no load, you are paying $100 to $1000 per year to hold its shares.
Annual maintenance fee: $45 to $175
Annual Mutual fund fee: $100 to $1000
Total cost on $50,000 IRA holding Mutual funds: $145 to $1175
IRA with physical Precious metals
Precious metals IRAs have three annual fees.
Annual fee for Gold IRA company: $0 to $100
Annual Custodian fee: $75 to $150
Annual Depository fee: $100 to $150
Total cost on $50,000 IRA holding Precious metals: $175 to $400
For a $50,00 account the Gold IRA the annual fees are higher than the Mutual fund IRA unless you invest in Mutual funds with a large fee.
There is another fee involved with a Gold IRA and that is the premium you will pay to purchase your bars and Coins.
If you look for a quote online for the price of Gold, what you will find is the "spot price" which is only applicable for a 400-ounce bar. Silver prices are quoted for 1000-ounce bars.
Most likely, you will be purchasing 1-ounce bars and Coins for your IRA so somebody has the take the 400-ounce Gold bars and 1000-ounce Silver bars and turn them into smaller products. Refineries and mints do this job and they charge a fee to cover their costs and profit margin.
"Premium" is the difference between the spot price you see quoted and the price of the bars or Coins you purchase. For example, the spot price of Gold today (08/01/2022) is $1789 per ounce. A 1-ounce Gold bar is $1866 so there is a $77 premium which equates to 4.3%. An American Eagle Gold Coin is $1978 so the premium is $189 or 10.6%.
Premiums on Silver are considerably higher than Gold because investor demand for Silver is overwhelming supply. These high premiums have existed for the past 18 months and there are no indications that this condition is going to change. Premiums on 100-ounce Silver bars are currently 7%. 10-ounce bars are 9%. 1-ounce bars are 15% and Silver American Eagle Coins have a 60% premium.
All investors have to pay these premiums whether they are purchasing metal for their IRA or their home safe.
Here at Satori Traders we always tell investors to purchase the products with the lowest premium over the spot price. Currently that means bars - not Coins - especially for Silver.
When you are ready to purchase products for your Gold IRA, ask the representative which products have the lowest premium over spot. Stick with these low cost bars and Coins and stay away from proof or special edition Coins.
Best Gold Coins to buy as Investment : Files
Gold IRA Fidelity
One of the criteria we can use to select a Gold IRA company is the number of years the company has been in business. On the long end of the ‘years in business’ scale is Fidelity Investments, founded in 1946.
This massive Investment management firm has more than 25 million customers and over $2 trillion in assets under management.
The Fidelity Gold IRA has a very low minimum Investment ($2,500) making it easy for investors to start an IRA.
Another positive for Fidelity is that the company doesn’t offer any proof Coins. There is no temptation for Fidelity sales people to use high-pressure sales tactics because the only IRS-approved products available are Bullion bars and Coins.
Investors who focus on BBB ratings may be concerned about Fidelity having a C- rating.
Before scratching Fidelity off the list of candidate companies, consider calling a company representative and asking them why their BBB rating is lower than their peers. Perhaps the rep will have a good explanation.
Startup fees at Fidelity may be a little higher than other companies but Fidelity’s low minimum Investment could justify this added expense.
Best Gold IRA
The best Gold IRA is the one that the Investor feels comfortable with based on their unique Investment objectives.
Some investors will choose their ‘best’ based on the location of the Depository, while other investors might give the ‘best’ designation to the candidate offering the juiciest promotion.
There are a few factors we can list as ‘must haves’ for candidates to be on the Gold Coin IRA list:
Listed with BBB and maintains an A+ rating
Insured Depository – preferably by Brinks or Lloyd's of London
Segregated storage of metals
Regular audits of Depository
Gold IRA reviews
There are several websites that gather customer reviews as a service to consumers.
Investors can use these resources to find Gold Coin IRA reviews.
Better Business Bureau (BBB)
Business Consumer Alliance
Consumer Affairs
TrustLink
Trustpilot
Customer reviews posted on sites like BBB and Business Consumer Alliance are likely to be real while reviews found by searching the internet on terms like “Gold IRA reviews” are usually posted by affiliate marketers.
After doing a little research you will likely notice the difference between legitimate customer reviews and the reviews created by affiliate marketers.
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With a Gold Coin IRA you can hold physical Precious metals using money from your tax-deferred or tax-exempt Retirement accounts.
A Gold IRA rollover let's you make this conversion without any risk of paying income taxes or early withdrawal penalties. Transferring funds to a Gold Coin IRA is also tax and penalty free as long as you complete the move within 60 days.
The primary benefit of a Gold IRA is gaining security for your hard-earned retirement savings while hedging your Portfolio against Inflation. You also achieve diversification away from Stocks, Bonds, and Mutual funds.
Gold Coin IRA : Resources
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