How To Open a Gold IRA

Steps for opening a gold IRA

The process of opening a gold IRA is a bit more involved than opening a traditional IRA, since you’ll be working with three types of service providers: one for recordkeeping and reporting, another to provide the gold, and a third to store the gold that backs your IRA.

1. Choose a self-directed IRA custodian

The first step you’ll take to open a gold IRA is to choose a qualified self-directed IRA (SDIRA) custodian that handles precious metals. Even though it will be backed by gold instead of stocks and bonds, your IRA can still be a traditional, Roth, SEP (if eligible), or SIMPLE (if eligible) IRA.

2. Open the account and complete paperwork

Once you’ve found a custodian that meets your needs, you’ll open your IRA account and complete any necessary paperwork. Next, decide how much money you’ll use to fund your account.

3. Fund by transfer, rollover or contribution

As with any IRA account, you can fund your gold IRA by transferring money into it from any other account. You can roll over an existing IRA or investment account into your gold IRA with a one-time transaction, and you can choose to make continuous deposits into your gold IRA account on a regular schedule.

4. Select IRS-approved gold products

Once your account is open and funded, it’s time to choose from IRS-eligible gold products. For this, you’ll need a precious metals dealer from whom the IRA custodian will make the purchase. After you select one, gold will be purchased that corresponds to the amount for which you funded your account.

5. Arrange approved storage and insurance

IRA-owned metals are held in a secure storage facility or depository, explained Scott Maurer, Certified IRA Services Professional with Advanta IRA. They’ll be held in the depository in the name of the IRA (not your personal name) until you decide to sell or distribute them. “IRA-owned metals can not be stored at your home or in a personal safe deposit box,” Maurer said.

Gold IRA rules and IRS requirements

You should be aware of a few eligibility requirements before taking the plunge on a gold IRA. It’s crucial to follow these requirements; otherwise, the IRS might consider your assets to be taxable income.

IRS gold eligibility rules

The list of requirements is short, but crucial. We’ve summarized gold eligibility below:

• Gold must be at least 99.5% pure to qualify for use in an IRA investment account.
• The gold must not be treated as a collectible item (such as a gold coin). There are a few exceptions to this.
• The gold must NEVER be stored in your home. It must always be stored in an IRS-approved depository.

Contribution limits and withdrawal penalties

Opening a gold IRA doesn’t exclude you from the annual contribution limit of $7,500 (or $8,600 if you’re over age 50). Any amount you contribute toward your gold IRA, outside of a rollover or transfer, counts toward the contribution limit. “The fact that the IRA will be holding gold as an asset has no bearing on annual contribution limits,” Maurer explained.

The withdrawal penalty is identical to any other IRA account, with a 10% early withdrawal penalty applied if you take out money before you turn 59 and ½. Beware of rules about storing and handling IRA gold; errors such as storing it at home or taking part in a prohibited transaction can result in immediate cancellation and/or taxation of your IRA funds.

» MORE: Gold IRA scams to avoid

Gold IRA fees and costs

Opening and funding a gold IRA comes with a price. You’ll likely pay a number of minor setup fees as a standard part of the process. We’ve listed a few applicable fees, along with price ranges you can expect.

• Setup fee: Often free as part of a promotion, but can be up to $300
• Annual fee: $50 to $300, paid to the custodian of your IRA
• Vault storage fee: $100 to $300
• Transaction fees: $25 to $100 per transaction

While some depositories charge a flat annual fee, others use a percentage-based model, charging a small percentage based on the value of the gold they’re holding for you. Ask about this when you’re interviewing potential depositories, since fees can vary widely.

Another fee-based point to consider is that some depositories act as aggregators, collecting lots of precious metals that you’ll own a claim to, rather than a specific piece of gold. Fees for aggregators tend to be cheaper than individually storing your gold assets.

Gold IRA alternatives in a traditional IRA

You may be wondering whether you can invest in gold through a regular IRA without opening a gold IRA. A gold IRA is a regular IRA, according to Maurer, and physical gold is an approved asset for IRAs.

“That said, most IRA custodians do not allow their IRA holders the option to invest in physical gold because they are not equipped to handle the custody and recordkeeping requirements,” Maurer said. “So, to have an IRA with physical gold as an investment, you need to have an IRA at a custodian that handles physical precious metals for their account holders.”

Gold securities

Unlike a piece of actual gold, gold securities are investments linked to gold and based on its value. This could be a mutual fund or an ETF based on gold-related assets, or a stock held from a gold-mining company. Gold securities are much more liquid than actual gold, and they often enjoy lower fees as well.

Gold mining stocks

If you’re interested in dabbling in precious metals, rather than a gold IRA, you may choose to invest in shares of companies that mine for gold. These companies profit on gold by selling it at market price and earning the difference between that and the cost of mining the gold.

Gold stocks can produce higher returns than gold itself, and they come with fewer strict regulations than actual gold. But, a disadvantage of gold stocks is higher volatility than other investment types. Purchasing shares of a well-established gold mining stock can sometimes assuage this volatility.

FAQ