IRAs, commonly known as individual retirement accounts, are a necessity these days due to the very real possibility that social security will no longer exist in the future. If you're planning your retirement, which you should be if you're not yet tired, this is an invaluable investment. They are also a wonderful way of deferring taxes until, upon retirement, you withdraw the money. The Taxpayer Relief Act, passed in 1997, allows precious metals such as silver, gold and platinum to be the chosen investment for an IRA.
IRAs in gold
As a long term investment, gold has been one of the most stable options available. With all of its uses, it is constantly in high demand. The price goes up as a direct reflection of the demand for it. Gold began being physically added to IRA back in 1998 after the passing of the aforementioned bill. The IRS is accepting only two types of gold even though there are more out there. Gold coins and gold bullion are the only two forms accepted by the IRS. One must watch their gold coins however, due to the fact that the IRS only accepts gold coins that are 0.9999% gold. They must be of legal tender and include coins such as the Australian gold nugget, American gold eagle, Canadian gold maple leaf and the American buffalo coin. When dealing in gold IRA accounts, the account holder is allowed to cash in all or part of their gold assets at age 59½ years old. The capital gains tax will be applied to this money unless the holder cashes out before the required age. In this case, a penalty fee of 10% will be assessed.
What do the experts say?
Professional investors aren't thoroughly convinced of gold IRAs' efficient use of tax advantages. The simple fact that you must sell them for more than what you paid is the basis for many of the experts claiming that investing in precious metals makes no income. The income in this scenario would be termed capital gains. The IRS also states the requirement that such trusts are to be held buy a trust company or some type of custodian.
The problem here is that not all custodians or trustees have the capability to handle gold. Problems with already existing IRA plans arise when the person's individual plan does not accept physical gold. A new IRA account may need to be opened with an establishment that does accept gold. This is not only inconvenient but requires all whole new set of monies with which open up the account. And what about your old IRA? Gold also has a tendency to chalk up certain fees. It has to be stored there by manifesting storage fees. At 1% of the entire holdings, the fee is not exorbitant; but can be one of many including account setup fees and theft insurance.
As of right now, gold stocks continue to climb; but how long can that realistically go on? Science has discovered numerous substitutions for substances or chemicals that we used to use on a regular basis. They are cheaper to make, use and cheaper to buy. What is the assurance that science won't turn the tables again by creating a substitute for gold and other precious metals? There is of course, no guarantee. We must simply trust in the value of the precious metals themselves. The IRS is constantly changing things so staying informed is of the utmost importance. Depending on your chosen custodians or trustees for this information would be a grave mistake. Do your own homework, do your own research; it is after all, your money; not theirs.