SIMPLE IRA

Gold IRAs: What They Are, How They Work, and What Kind of Gold Goes Into Them

Although Rosland Capital does not provide investment or tax advice or the gold IRA itself, it does sell a range of IRA-eligible precious metals products. This includes gold, silver, platinum, and palladium in the form of coins and bars.

You’re probably familiar with traditional individual retirement accounts (IRAs), such as the SIMPLE IRA, SEP IRA, or Roth IRA, but did you know that you can add certain eligible gold products to a gold IRA? You can also add other precious metals to an IRA: silver, platinum, and palladium. 

Ever since the Great Recession that began in 2008, gold and other precious metals have enjoyed popularity and interest for holding value against market volatility and inflation. The quick recession and relative market volatility during the pandemic took the value of gold and other precious metals to record-breaking highs. 

It’s important to learn about gold IRAs and how they work because this can give you another tool for building and protecting the wealth you’ve built for retirement. Also, while many of the underlying rules for traditional IRAs and Roth IRAs also apply to precious metal IRAs, there are some crucial differences. Let’s take a look at what a gold IRA is, how it compares to traditional and Roth IRAs, and what kinds of gold and other precious metals you can contribute to an IRA.

What is a Gold IRA? How is it different from a traditional IRA?

A pile of gold bars.

Gold IRAs are individual retirement accounts into which the IRS allows the account owner to place and hold physical gold. Other precious metals IRAs include a platinum IRA, palladium IRA, and silver IRA. Only these four precious metals — gold, silver, palladium, and platinum — are eligible for inclusion in these unique, self-directed IRAs. 

With precious metals IRAs, the account owner typically exercises greater control in choosing which eligible assets to include in his or her accounts. This is compared to traditional IRAs and Roth IRAs, which are typically established through an employer and managed by a qualified financial professional who uses account owners’ contributions to buy pre-selected collections of stocks, bonds, and mutual funds chosen by their brokerage firm.  

Most people are more familiar with traditional IRAs and Roth IRAs. Traditional individual retirement accounts take different forms to appeal to different employment situations and financial goals. Some of the most common types of IRAs include:

  1. SIMPLE IRAs — a Savings Incentive Match Plan for Employees (SIMPLE) IRA is a form of traditional IRA retirement account that employers with under 100 employees can establish for employees. Employers must either offer a 3% matching contribution of the employee’s pay or a 2% nonelective contribution regardless of whether the employee contributed to the IRA or not.
  2. SEP IRAs — a Simplified Employee Pension Plan (SEP) IRA can be established by an employer of any size for an employee, but a SEP IRA is often used by self-employed individuals and freelancers because only the employer contributes to the account.
  3. Roth IRAs — these follow most of the same rules for other traditional IRAs, except for a few differences regarding contributions, tax rules, and distribution of funds. 

These kinds of IRAs only allow owners to contribute paper assets. In this case, paper assets include cash, stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other representations of wealth, as opposed to hard assets or physical assets such as physical precious metals or real estate.

A few similarities between traditional IRAs and precious metals IRAs include:

  • Tax benefits and incentives to encourage saving for retirement
  • Annual contribution limits 
  • Penalties of up to 25% for early withdrawal

A big difference between traditional IRAs and Roth IRAs compared to precious metals IRAs is that you can contribute physical gold, silver, platinum, and palladium to precious metals IRAs. This means you can purchase and hold approved gold bullion products in your gold IRA, for example. You can also roll over existing traditional IRAs into precious metals IRAs. This process involves converting paper assets into physical assets. Eligible precious metals include bullion in the form of coins and bars.

What Kind of Gold Can I Put In My Gold IRA?

The IRS describes the kinds of gold and other precious metals eligible to contribute to your gold, silver, platinum, or palladium IRA. IRA-eligible forms include “any gold, silver, platinum, or palladium of a fineness equal to or exceeding the minimum fineness that a contract market requires for metals which may be delivered in satisfaction of a regulated futures contract.” 

The following gold, silver, and palladium bullion coins are among the IRA-eligible precious metals products:

How Does a Precious Metal IRA Work and How Do I Start One?

The biggest difference about how gold IRAs work compared to traditional IRAs and Roth IRAs is that you need to have the physical precious metal. Most IRAs use a digital account indicating that you own a certain amount of stock. It’s important to be aware of the rules for storage of the precious metals you contribute. 

These metals must be stored and maintained by a trustee or custodian approved by the IRS in an approved depository. You can’t simply keep your gold and silver coins and platinum bars in a safe at home or in a safety deposit box and call it an IRA. This may lead to early withdrawal penalties.  

No one likes the idea of paying fees to store and maintain the physical precious metals for an IRA. But there can be value in diversifying a portfolio funding their retirement account. When market volatility and worries about inflation, interest rates, and the national debt threaten, it’s hard to put a price on the peace of mind that comes from taking steps to help guard your wealth and your future financial security.

I cannot overemphasize the need to do thorough research into the different kinds of IRAs available. Research and determine which option or options may be right for you. For example, begin with some basics such as researching spot prices and tips for buying gold and other precious metals. Then I encourage you to investigate the finer points about how gold IRAs and other precious metals IRAs work. Understand what fees may be involved.  Get more information about gold IRAs and IRA-eligible precious metals products from Rosland Capital.