What are the pros and cons of gold IRA?

[Tim Beaton]

Hi. I’ve been considering a gold IRA for my retirement, and it seems pretty attractive, especially with inflation being what it is. Plus, gold and silver prices surge to new records. Anyone have thoughts on the pros and cons of investing in gold via gold IRAs?

 

[Smart Invest]

Gold IRAs definitely have some great benefits, especially when it comes to hedging against inflation. One of the biggest advantages is the tax benefits. Like, you can contribute pre-tax dollars, which reduces your taxable income for the year, and all that growth is tax-deferred.

 

[D Bergman]

Like, you can contribute pre-tax dollars, which reduces your taxable income for the year, and all that growth is tax-deferred.

That’s true, but one downside is that gold doesn’t pay dividends or interest. With stocks, for instance, you can get passive income through dividends or bonds with interest. Gold just sits there, and you have to wait for it to appreciate. It's not making you money unless you sell it, so it's more about preserving wealth than growing it.

 

[Tim Beaton]

Gold just sits there, and you have to wait for it to appreciate. It's not making you money unless you sell it, so it's more about preserving wealth than growing it.

Yes, but it seems like the wait is justified. Have you seen how gold appreciated in recent years? The price of gold increased by approximately 88.38% (from about $1,461.23 per ounce in November 2019 to $2,752.65 as of this date.)

 

[Nigel Harris]

That’s true, but one downside is that gold doesn’t pay dividends or interest.

Exactly. If you're looking for cash flow, gold isn’t it. But you can’t really ignore the whole inflation hedge argument. Over the long term, gold has held its value way better than the dollar. I mean, the U.S. dollar has lost 99% of its value compared to gold over the last century. That’s wild.

There's also the portfolio diversification aspect. Gold IRAs help spread your investments out, so you’re not just relying on stocks or bonds. And since the IRS allows you to hold multiple IRAs, you can mix traditional paper assets with physical gold. That way, you're covered on both fronts.

 

[D Bergman]

There's also the portfolio diversification aspect. Gold IRAs help spread your investments out, so you’re not just relying on stocks or bonds. And since the IRS allows you to hold multiple IRAs, you can mix traditional paper assets with physical gold. That way, you're covered on both fronts.

True, but diversification isn’t always a guarantee. You’re still putting a chunk of your money into precious metals, which are affected by their own market conditions. Gold prices can swing up and down. Also, the IRS restrictions on what types of metals you can hold kinda limits your options. Not every coin or bar is allowed.

 

[Marin C]

Anyone have thoughts on the pros and cons of investing in gold via gold IRAs?

I think that gold IRA is a good choice for people who are really worried about inflation or want to diversify into something tangible. Yes, there are fees, but they are relatively low – you’re looking at maybe $160 to $200 per year for storage and custodian fees. Not bad considering you're keeping your investment secure.

Plus it’s surprisingly easy to roll over an old 401(k) or traditional IRA into a gold IRA without any penalties. That’s perfect for people who’ve changed jobs and want more control over their retirement funds. I rolled my Roth IRA into a gold one, and it was a pretty straightforward process thanks to the gold IRA company that I invested with.

If we're talking about the downsides, IRS rules are no joke. If you don’t follow them exactly, you could get hit with penalties, or lose the tax-advantaged status of your account. Plus, the fact that you have to use an approved custodian for storage makes it all a bit complicated. You can’t just stash the gold under your bed.

There are also a bunch of shady precious metals dealers try to sell misleading products or mark up certain coins. If you’re not careful, you could end up paying way more than you should for exclusive coins.

And finally, if you want to open a gold IRA, you'll have to find a trusted gold IRA company. These companies have investment minimums, and you’re often looking at a minimum of $10,000-$30,000 or more just to get started.