When shopping for a gold IRA, it’s important to understand who’s responsible for each aspect of the process. These entities can include:
- Custodian: This is the entity that will hold and administer your retirement account.
- Dealer: This entity facilitates the sale of precious metals that can be added to your retirement account.
- Depository: This is where your precious metals will be stored. This facility must be approved for use with precious metals IRAs.
- Account representative: This is the person you’ll likely be working with the most. They may help coordinate account set-up, funding, and the purchase of approved precious metals.
Depending on the company you choose, it may offer all of these services itself, or it may partner with third-party companies. In some cases, you may be given the option to choose your own depository and/or custodian. In other cases, the company you’re working with may take care of everything for you.
Account Basics
Precious metals can play an important role in retirement planning for many investors. For some, adding an asset that doesn’t perform in lockstep with stocks and bonds makes sense for their goals and circumstances. If this sounds like you, it’s important to know how precious metals IRAs work before deciding whether, and from whom, to purchase an account.
It’s tempting to focus on marketing pitches and shiny promises when shopping for a gold IRA company. However, it’s equally important to know what to expect after the ink is dry. The best companies will walk you through how your account will work, be transparent about costs up front, and empower you to make an informed decision about whether a gold IRA is right for you.
Fees and Pricing
Some gold IRA companies tout free account set-up as a major selling point. While this can be attractive to those interested in rolling over existing retirement funds, it’s just one aspect of cost. Before making a decision, ask for a written breakdown of both one-time and ongoing costs, including:
- Account establishment fees
- Annual fees paid to the custodian for account administration
- Storage fees (ask whether metals are stored on a segregated or non-segregated basis)
- The price you’ll pay to acquire precious metals and how the dealer makes money (aka the “spread” between the amount you pay to buy the metals and the amount you would receive if the dealer were to buy them back from you)
- Any fees you would pay to sell your metals or take a distribution
- Any minimum investment amount required
Depending on the company you’re working with, the dealer, custodian, and/or depository may assess some of these costs, making fee structures an important consideration when comparing best gold IRA companies. Also keep in mind that just because administrative fees are low, that doesn’t necessarily mean you’ll receive a competitive price on the metals themselves.
Eligible Metals
Only certain types of bullion coins and bars are permitted in an IRA. Generally speaking, metals must meet certain minimum fineness requirements, and some collectible coins are ineligible even if they’re made of silver or gold.
That doesn’t mean you should shy away from higher premium coins. But if your account representative recommends a product, make sure you understand whether you’re paying more for rarity, design, limited availability, or any other reason besides the precious metal content.
Ask your account representative to outline at least two eligible options for your precious metals IRA. Compare them in terms of purity, total cost, liquidity, and the process you would follow to sell your metals in the future. If you don’t receive a clear answer, or the focus immediately shifts to creating a sense of urgency, take note, as this may say as much about the company’s sales practices as anything else.
Transfers and Storage
If you want to fund your new IRA with money from an existing retirement account, this could be accomplished through a transfer or rollover. With a transfer, the funds are sent directly from one trustee/custodian to another, while with a rollover, they’re distributed to you, and then you have the option to roll them over into a new account within 60 days. (Note that the IRS only allows one IRA-to-IRA rollover in any 12-month period.)
Errors made in the rollover process could result in tax and penalty implications, so it’s a good idea to get help from a tax professional. While your precious metals IRA company can’t give you tax advice, they should be able to provide you with clear information and paperwork to facilitate a smooth rollover.
Also bear in mind that the existing IRA provider will ultimately control the pace of the transaction and may require additional steps (such as ID verification or your signature on certain documents) before releasing the funds. Ask for specifics about the process up front, including a point-of-contact who will keep you apprised of the rollover’s status.
Warning Signs
No one can accurately predict precious metals prices, and reputable IRA companies should make that clear. That said, there are plenty of warning signs to help you differentiate between more and less reputable companies, including:
- Failure to provide clear information on fees, services, and products (ask for the fee schedule up front!)
- Failing to discuss both the potential benefits and drawbacks of investing in physical metals
- Unclear information about services provided by a third-party custodian/depository
- Sales pitches premised on fear or dire predictions, rather than straight-forward educational information
- Unwillingness to clearly explain redemption procedures prior to purchase
- Repeated pressure to act immediately
Equally important: Gauge the company’s customer service after you open an account. Establishing an IRA might be easy, but what about managing it? Call with questions down the road and see how quickly you’re able to speak with a knowledgeable representative.
Portfolio Fit
Precious metals can play a role in retirement planning for some investors, particularly those interested in asset diversification. But as with any investment, it’s important to consider your own circumstances (including liquidity needs, time horizon, and the makeup of your overall portfolio) before investing. And unlike some other retirement account investments, physical precious metals come with potentially significant ongoing fees.
To make an informed decision, request and compare information from multiple IRA companies regarding pricing, fees, storage/custody services, and distribution procedures. File all disclosure documents, fee schedules, and account paperwork together for easy reference.
