Last Updated on December 15, 2020
Holding Gold in a Self-Directed IRA
Investors have always been permitted to hold gold and other precious metals in an IRA or 401(k) plan. The purchase of investments, such as gold in a retirement vehicle allows you to generate tax-free gains on the sale. However, the majority of banks and financial institutions will limit the type of investments you can make by offering the financial products they sell, as this is how they make money.
Investors who want to purchase gold and other alternative asset investments will fare better going through a passive custodian, such as IRA Financial Trust. The role of a passive custodian is to administer self-directed retirement accounts. A passive custodian is not in the business of selling financial products or offering financial advice. As a result, investors have the freedom to make alternative asset investments, such as gold and silver, with a custodian controlled or checkbook control structure.
Is Gold a Good Investment?
Recently, there has been much discussion over the impact of alternative investments with the recent Stock Market downturn. As the U.S.-China trade war ensues, many investors are looking to “safe haven” investments, such as gold and silver.
Gold and other precious metals have been somewhat dormant over the past few years but as of writing this article, the price of Gold per ounce is $1,500.70. As the future of gold appears more and more favorable, is now the time to buy?
IG Index contributor and author of the Brookville Capital Newsletter, Simon Popple reiterates what every investor should know: investing is all about timing.
“For the past few years there have been many other, more traditional investments that have been doing very well,” Popple explains. “But all these markets are either at or close to all-time highs, so people are being forced to look elsewhere.”
Gold is an inflation hedge and is a more attractive investment during times of inflation. As the cost of the U.S. dollar declines, the value of gold rises. With the current global financial market, the latent inflationary fears have rebounded and as a result, more individuals are turning to gold investments.
Certainty in an Uncertain World
“In the current market, you have a lot to worry about,” says Popple. “For many, physical gold provides a degree of certainty in an uncertain world.”
The importance of retirement portfolio diversification has increased with the devalue of currencies and the concerns of debt and inflation.
Self-Directed retirement plans, such as the Self-Directed IRA, are perfect retirement vehicles for retirement diversification. For example, retirement investors have the ability to purchase traditional assets, such as stocks and bonds – but they can also purchase alternative assets, like gold to mitigate risk of investments moving in the same direction.
“Bonds and the U.S. dollar used to be viewed as the go-to assets in weak markets,” says Popple. “But with many bonds offering little or negative yield, investing where you’re going to lose money does not make a huge amount of sense.”
The Future of Gold Investments with a Self-Directed IRA
Wherever the blame may fall for the current trade wars is irrelevant when in comes to gold investments. The important element behind the U.S.-China trade wars is its impact on alternative investments, and the future of gold investments. As with every investment, the future is never clear, particularly because we do not know how tensions between U.S. and China will play out.
“This conflict is causing a lot of uncertainty ,” Popple says, “(and) the more uncertainty there is in the market, the more likely it is that the gold price will increase.”
Popple believes that the fear of recession is valid, as recession “happens regularly.” But of course, there is no telling when the next recession will occur.
“Interestingly, it’s not the recession itself, but the perception that one is on its way that seems to be driving people towards safe haven assets,” explains Popple, “such as bonds, silver and gold.”
Get in Touch
Precious metals dealers have made it clear that gold investments with a Self-Directed IRA are possible, but if you choose to purchase gold, carefully review the Self-Directed IRA prohibited transaction rules before moving forward. There are certain Internal Revenue Code (IRC) rules to be aware of before purchasing, holding and selling precious metals, such as gold.
At IRA Financial, we do not offer advice on what type of investments you can make with your Self-Directed IRA, or recommend buying gold. However, we will offer guidance so you avoid triggering a prohibited transaction.
At IRA Financial, our goal is to educate clients on the investments that are IRS approved and we will continue to do so. IRA Financial has helped over 15,500 Self-Directed IRA investors invest over $4.5 billion in alternative assets. We have significant experience helping retirement investors navigate the complex IRS rules to ensure your account remains IRS compliant.