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Self directed Gold and Silver IRA

IRAs and self directed IRAs were introduced in 1974 as part of the Employee Retirement Income Security Act (ERISA). With this legislation Congress provided tax-advantaged savings vehicles for individuals who weren’t covered by a retirement plan at work.

Based on the objectives outlined for ERISA, self directed IRA accounts (SDIRA) would theoretically allow individuals to invest in alternative assets, but ERISA didn’t specify the assets that were allowed in an SDIRA. Instead of listing permissible assets, ERISA only listed assets that could not be held: insurance contracts and collectible items.

ERISA also specified that IRAs could only be opened at banks, financial institutions, and regulated trust companies. This constraint meant that investors were limited to the assets that these conservative Trustees allowed – primarily Stocks, Bonds, and Mutual funds.

Eventually the IRS relaxed the Trustee rules and non-bank Trustees were allowed to open IRA accounts for investors. Many companies took advantage of this change, but only a few offered alternative Investments.

Despite the potential of self directed IRAs, very few investors took advantage of them and the ones who did used them primarily to hold Real Estate.

All of this changed in 1997 when the Taxpayer Relief Act was passed. This sweeping tax legislation provided clear guidance on the assets that could and could not be held in a self directed IRA.

For the first time ever, investors were explicitly allowed to hold Gold and Silver inside their tax-advantaged retirement accounts. Investment management companies began offering self directed Gold and Silver IRA accounts but the demand for these alternative Investments was fairly limited.

It wasn’t until 2008 in the aftermath of the Great Financial Crisis that investor demand for alternative Investments really kicked into high gear. At that point the Gold IRA industry expanded significantly with many companies taking advantage of the new investor demand for investing options.

How does a Gold IRA work

To describe how a Gold IRA works, let’s start with the different entities that are involved.

Gold IRA company

A Gold IRA company facilitates the process of establishing a self directed IRA, selecting a Custodian and Depository, and then purchasing the Precious metals to be held in the account. Gold IRA companies are often Precious metals Dealers.

Trustee / Custodian

The Trustee or Custodian ensures that all of the IRS rules for IRAs are followed and that required paperwork is completed and filed.

Depository

The IRS requires that all IRA assets be held by a third-party whether the assets are paper (Stocks, Bonds, Mutual funds) or physical Precious metals. A Depository provides secure storage and insurance for valuable assets.

Broker-Dealer

A Precious metals Dealer buys and sells the physical metal held in a Gold IRA. The Gold IRA company often acts as the Broker-Dealer.

Now that we know the players, let’s walk through the steps to establish a self directed Gold IRA.

Choose a Gold IRA company and complete their intake form. The company will help you pick a Custodian and Depository. With most companies you will pay a small fee at this point.

If you are moving funds from an existing Retirement account you will contact that company and request a transfer or rollover.

Fund the Gold IRA account by wiring or mailing money to the Custodian. In a rollover funds will be wired directly from your existing Custodian to the Gold IRA Custodian. In a transfer you will receive funds from your existing Retirement account and then forward that money to the Gold IRA Custodian.

Let the Broker-Dealer know which Precious metals products you want to hold in the IRA.

Get a written statement which identifies the products you intend to purchase, their cost, and all related fees. Do not proceed until you have received this statement.

You approve the purchase of the Precious metals products.

The Gold IRA Custodian pays for the Precious metals and the Broker-Dealer ships the products to the Depository.

Once your Gold IRA is setup you will receive regular statements about the account holdings and you can make additional contributions to the account just like you would with a regular IRA.

There are some annual fees that you’ll have to pay, but that is no different than any other Retirement account. We’ll cover these fees below.

When you reach age 59 ½ you can start taking distributions from your Gold IRA and you will have the option of taking cash distributions or receiving the physical metal that has been held on your behalf. At age 70 ½ or 72 (depending on your year of birth) you will have to begin taking required minimum distributions.

Benefits of Gold IRA

Gold IRA accounts offer several important benefits:

  • Diversification out of Stocks, Bonds, and Mutual funds
  • Hedge against Inflation and currency debasement
  • Safety from market crashes and volatility

The biggest benefit of a Gold IRA is that it provides you with an option for investing your tax-advantaged retirement savings into something tangible. Instead of being stuck in the traditional paper assets that Wall Street offers, a Gold IRA lets you hold your hard-earned money in physical Silver and Gold.

Gold IRA pros and cons

Like all Investments, there are Gold IRA pros and cons to consider.

The primary positive aspect of a Gold IRA is that it lets you move some of your tax-advantaged savings into the safety of physical Precious metals.

The main negative is the IRS requirement that a third-party Custodian has to store the metal in the Gold IRA account. Ideally, you would store the metal in a location where you had ready access to it.

Pros

  • A Gold IRA is the only way you can invest in physical Precious metals using money from your tax-advantaged retirement savings.
  • A Gold IRA allows you to diversify your Investment Portfolio away from Stocks, Bonds, and Mutual funds.
  • A Gold IRA acts as an Inflation hedge because the price of Gold tends to rise as the Purchasing power of the US Dollar declines.

Cons

  • The IRS requires that a third-party Custodian holds the assets in all IRA accounts. This means you have to store your IRA Precious metals in an IRS-approved Depository.
  • Precious metals that you already own cannot be placed in your Gold IRA account. The account Custodian has to purchase the metal for storage in the Depository.
  • The Gold IRA industry is unregulated so there are some unscrupulous Gold IRA companies that use fear tactics and high-pressure sales techniques on unsuspecting investors.
  • There are more fees in a Gold IRA than in an IRA holding only paper securities (Stocks, Bonds, Mutual funds). The additional fees cover the cost of secure storage and insurance for the Precious metals.

Gold IRA tax rules

In general, Gold IRA accounts receive the same tax treatment as traditional IRA accounts. You have the same maximum annual contributions and the same withdrawal rules about early withdrawal penalties and required minimum distributions.

There are a few unique Gold IRA tax rules, however, that deal specifically with the physical Precious metals being held in the account.

  • Only Gold, Silver, Platinum, and Palladium bars and Coins are allowed. There are four other Precious metals that are not allowed: Rhodium, Ruthenium, Iridium, and Osmium.
  • Metal must be Bullion quality or better. That means 99.5% pure for Gold and Silver. Platinum and Palladium must be 99.95% pure. An exception is made for American Gold Eagle Coins which are only 91.67% pure.
  • Numismatic (collectible) Coins like pre-1933 Gold Coins are not allowed.
  • Metal must be purchased by the account Custodian. Metal that you already own or purchase cannot be transferred into the IRA account.
  • Distributions can be taken in physical metal or the metal can be sold for cash distributions.
  • Distributions are taxed as ordinary income instead of being taxed at the 28% rate for collectible items.

Gold IRA fees

One of the common complaints raised by Gold IRA investors is that the fees are too high. While this complaint is legitimate, the higher fees are related to the physical Precious metals being held in the IRA account. If you aren't willing to pay these fees then you are stuck with the traditional Investments that Wall Street offers: Stocks, Bonds, and Mutual funds.

Before we talk about specific Gold IRA fees let's acknowledge that there are fees involved with Mutual fund Investments. Whether the Fund is front-load, back-load, level-load, or no-load, the typical fee on a Mutual fund is 0.2% to 2.0% per year. This fee is usually taken directly out of the Fund so it is easy to forget that you are paying this fee. When people complain about the high fees in a Gold IRA they are most likely overlooking the fees involved with Mutual fund Investments.

Let's take a look at each of the fees you will pay when you invest in a Gold IRA.

Gold IRA setup fee

Gold IRA companies typically charge $50 to $200 to setup of your Gold IRA account. This fee may be waived depending on the size of your Investment.

Broker fee

The Broker who provides your Precious metals may charge a flat transaction fee, a fee based on the size of your Investment, or their fee may be included in the premium you pay for the metal (covered below). Some companies may refer to this fee as a sales commission.

Annual IRA maintenance fee

Most of the Gold IRA companies charge an annual fee of up to $100 for maintaining your Gold IRA account. Augusta Precious Metals, however, doesn't charge this fee. According to Augusta, it isn't appropriate to charge this fee because you are investing in a self-directed IRA where you make all the buy and sell decisions.

Annual Custodian fee

Custodians typically charge $80 to $150 per year.

Annual Depository fee

Depositories typically charge $100 to $150 per year.

Premiums

If you look online for the price of Gold or one of the other Precious metals, what you will find is called "spot price". Spot prices only apply to large quantities of the metals. For example, the spot price of Gold is for a 400-ounce bar and the spot price of Silver is for a 1000-ounce bar. Mints and refiners purchase these large bars and turn them into the smaller products that investors typically purchase.

To cover their costs and make a profit, mints and refiners charge a premium over the spot price. For example, the spot price of Gold today (08/27/2022) is $1749.80 but a one-ounce bar of Gold will cost you $1827 at APMEX.com. That's a premium of $77.20 or 4.4%. 

Premium varies depending on the metal and the type of product you are purchasing. Coins from government mints have the highest premiums and bars have the lowest premiums. Premiums on Silver products are significantly higher than Gold because the demand for physical Silver is overwhelming the available supply.

While it is easy to compare Gold IRA companies based on their setup fees and annual fees, comparing the premiums they charge can be a challenge. In most cases you won't discover the premiums until you are ready to make a purchase. It is important, however, to pay attention to these premiums to ensure that you aren't overpaying for your Precious metals. 

Here are two tips you can use to keep from paying unreasonable premiums:

1. Ask the Gold IRA representative which products have the lowest premium over spot price. This will usually be bars instead of Coins.

2. Compare the price of the products you are purchasing against an online Bullion dealer like APMEX.com or JMBullion.com. If the Gold IRA company is charging a significantly higher premium, ask them why. If their premium is outrageous take your business to another Gold IRA company.

Of all the fees you will pay to invest in a Gold IRA, premium is the fee that can harm your Investment returns the most. Before you approve the purchase of metal to hold in your IRA account it is critical that you get a written invoice which itemizes the price you are paying for the metal and all of the related transaction fees. Only approve the transaction if the premiums are comparable to online Bullion dealers. If your Gold IRA company refuses to do this, find another company to work with.

Before we leave the topic of Gold IRA fees, there is one more item to cover.

Proof and special edition Coins

Although the IRS does not allow Numismatic or collectible Coins in a Gold IRA, they do allow proof and special edition Coins. These Coins have very high premiums and are typically a poor Investment.

As an example, a regular American Gold Buffalo Coin can be purchased today (08/27/2022) for $1927 while the proof version of the same Coin is $2057. The premium for the regular Coin is $177.20 or 10.1% while the proof Coin has a premium of $307.20 or 17.6%. If you purchase the proof Coin with a fancy box and a certificate of authenticity you will pay $2547 which represents a premium of $798 or 45.6%.

Unscrupulous Gold IRA companies try to pressure investors into purchasing high priced Coins because they make more money. A common mistruth that these shady operators tell is that proof Coins have higher demand from investors and it will be easier to sell the Coins when it is time to do so. This is pure BS - informed Precious metals investors would never pay a premium for a proof Coin, much less a fancy box or a piece of paper.

There are three common complaints that Gold IRA investors voice and one of them involves buying proof Coins and losing money when they sell their Coins. It is easy to avoid this issue by simply avoiding these overpriced Coins in the first place.

Gold IRA reviews

There are two types of Gold IRA reviews to be aware of: affiliate marketer reviews and customer reviews.

Affiliate marketer reviews

Affiliate marketers get paid for sending customers to Gold IRA companies. When you search the internet for terms like "best Gold IRA" or "Gold IRA reviews", all of your search results are going to be from affiliate marketers.

There's nothing wrong with affiliate marketing but you need to understand that these people have a bias. In most cases they are going to point you at the Gold IRA companies that pay them the largest commissions, whether those companies are actually the best or not.

In addition to having a bias, most affiliate marketers have very limited knowledge about the products they are marketing. Without a background in Precious metals they are unable to explain what premium means or how it affects your Investment.

Gold Well Live is also an affiliate marketer but we have an in-depth understanding of the Precious metals based on 20 years of investing experience. We bought our first Gold Coins and Silver bars in 2002 and have been avidly studying the Precious metals sector ever since.

Our mission at Gold Well Live is to educate you so you make an Investment that is best for your personal objectives and tolerance for risk. Instead of simply pointing you at  the "best" Gold IRA companies, we teach you how to find the company that is best for you.

Customer reviews

The best Gold IRA reviews come from customers who have done business with a company and gained first-hand knowledge of how the company treats its customers. There are several websites where we can find these customer reviews:

  •  Better Business Bureau (BBB)
  • TrustPilot
  • Business Consumer Alliance
  • TrustLink

At Gold Well Live we prefer the BBB and TrustPilot reviews because these companies take active measures to filter out the paid reviews that plague the internet today. Businesses can buy positive reviews as a way of attracting customers and it is these reviews that BBB and TrustPilot try to avoid. The BBB only publishes 62% of the reviews that it receives - that suggests that at least 38% of the reviews available online have been paid for.

When you read customer reviews there are some positive comments you are looking for that  suggest a Gold IRA company is reputable:

  • the company provided education
  • there was no pressure to make a decision
  • they walked me through the process

Here are some negative comments you may see:

  • I felt pressured
  • there was no feedback

If you read enough customer reviews you will notice that there are three common complaints:

1. high pressure sales techniques

2. overpriced Coins

3. slow delivery of metals

Obviously, you are looking for Gold IRA companies that have lots of positive reviews and you want to avoid the companies with consistently negative reviews.

Customer complaints on BBB can be particularly informative because a company has to respond to these complaints in order to maintain an A+ rating. Seeing how a company attempts to resolve customer complaints can provide insight into how the company treats its customers.

Best Gold IRA companies of 2022 planning your retirement

All of the Gold IRA companies claim to be the best so it takes a little bit of work to find the one that is actually best for you. If you spend some time searching for the "best Gold IRA companies" you will come up with a short list of companies that are consistently mentioned. This short list gives you a good place to start.

American Hartford Gold

Augusta Precious Metals

Birch Gold Group

Goldco

Noble Gold

Patriot Gold Group

Regal Assets

After you identify some potential Gold IRA companies you can compare them based on the criteria that are most important to you. We have identified some filtering criteria below.

Minimum Investment

Each of the Gold IRA companies requires a minimum Investment of $1,000 to $50,000. If you have less than $50,000 to invest you can narrow your candidate list based on this criteria.

Years in business

When a business has a long history there are more customer reviews you can use in your evaluation. At Gold Well Live we prefer Gold IRA companies that have been operating for at least 10 years.

BBB rating

With its start in 1926, the BBB is the oldest rating agency. They evaluate businesses based on their transparency and the way they deal with customer complaints. An A+ rating from the BBB suggests that you will have a good experience with the company.

The primary BBB rating is a letter grade from A to F. There is a secondary rating of 0 to 5 stars based on the ratings that customers give the company.

Focus on education

Most investors have limited knowledge about Precious metals and self-directed IRAs so the best Gold IRA companies make a concerted effort to educate their customers. This education process begins with the company's website and then continues when you interact with the company's representatives.

When you visit a company's website you should find at least a basic guide about Gold IRA Investments. Ideally you will also find a library of videos and articles that are regularly updated. 

Some companies provide extensive educational resources on their website while others require that you contact them first before they send you in-depth materials via email or snail mail.

Customer reviews

Customer reviews give you insight into how a Gold IRA company treats its customers. Take the time to read BBB and TrustPilot reviews for any company you are interested in.

Fees

Fees for a Gold IRA are fairly similar from one company to the next. It is going to cost you from $200 to $400 per year to hold physical Precious metals inside a tax-advantaged Investment vehicle.

If you want to use fees as a comparison factor for selecting the best Gold IRA company, focus on the management fee that the Gold IRA company charges. You are investing in a self-directed IRA where you make all of the buy and sell decisions so the Gold IRA company isn't going to do much for you once the IRA is established. Augusta Precious Metals recognizes this fact and does not charge a management fee.

After you compare your candidate Gold IRA companies based on the criteria that you find most important, you will narrow your list down to just one or two companies. At that point it is time to reach out to the companies and make contact.

The best Gold IRA companies will patiently work with you to answer all of your questions and discover your Investment objectives. If you feel pressured during this initial contact, cross the company off your list and contact the next one.

The Gold Well Live team has evaluated all of the companies that consistently appear on the "best" lists. Out of those seven companies we believe the four listed below our best.

If you have $50,000 or more to invest Augusta Precious Metals is by far the best company overall.

Augusta Precious Metals

Year founded

BBB rating

Minimum Investment

2012

A+

$50,000

Augusta Precious Metals is committed to educating their customers. The company provides extensive educational materials on its website and investors with $100,000 or more to invest can schedule a 1-on-1 teleconference with Devlyn Steele, the company's Harvard-trained director of education. Many of Augusta's customers state that the company worked with them patiently until they were comfortable making an Investment in Precious metals. Augusta minimizes the fees you will pay for a Gold IRA and they never charge an IRA maintenance fee.

Birch Gold

Year founded

BBB rating

Minimum Investment

2003

A+

$10,000

Conservative politician Ron Paul chose Birch Gold Group as his Gold IRA company. Dr. Paul has been an advocate of real money and sensible economic principles for decades so his endorsement of Birch Gold is significant. Birch offers extensive educational resources on its website including a calculator that shows how performance on a 60/40 Portfolio of Stocks and Bonds improves when it is diversified with a small amount of Gold. First year fees are waived with an Investment of $50,000 or more.

Goldco

Year founded

BBB rating

Minimum Investment

2006

A+

$25,000

Goldco has a 16-year track record of helping investors protect their tax-advantaged savings with the security of Precious metals. Goldco is highly rated by the BBB, TrustPilot, and the Business Consumer Alliance. Based on more than 1,000 5-star reviews, Goldco is also well liked by its customers. Goldco publishes educational materials on their website and has additional resources available via email after you speak with one of their Precious metals specialists. Investors with $100,000 or more to invest receive $10,000 or more in free Silver.

Regal Assets

Year founded

BBB rating

Minimum Investment

2010

B+

$10,000

With a self-directed IRA at Regal Assets you can invest in Precious metals, Crypto currencies, and Stablecoins all in the same account. This unique Investment vehicle lets you trade that major digital assets and then park your profits in physical Precious metals. Regal provides basic educational material on their website then mails you an in-depth investor kit and DVD after you speak with one of their IRA specialists.

Wrapup

Self directed Gold IRA accounts provide a way for you to protect your tax-advantaged retirement savings with the time-tested security of physical Precious metals. This unique Investment vehicle is not complicated but it is different than the traditional Investments you may be familiar with. To help with your understanding of Gold IRAs, here's a recap of the main points covered in this article:

  • Self directed IRA accounts were established in 1974 as part of ERISA.
  • In 1997 the Taxpayer Relief Act specified that Gold and Silver could be held in self directed IRAs. Platinum and Palladium were added in 1998.
  • To establish your self directed Gold IRA you will interact with a Gold IRA company, a Custodian, a Depository, and a Precious metals Dealer.
  • Before you approve the purchase of metal for your IRA it is critical that you get a written invoice which itemizes the cost of the metal you are buying and any related transaction fees.
  • When you have your itemized invoice in hand you can compare the price you are paying for your metal against online Bullion sellers like APMEX.com and JMBullion.com.
  • The biggest benefit of a Gold IRA account is that it is the only way to purchase and hold physical Precious metals using your tax-advantaged savings. Additional benefits are Portfolio diversification, Inflation hedging, and safety from market crashes.
  • You Gold IRA account receives the same tax treatment as a regular IRA with a few differences that account for the fact that you are investing in physical assets instead of paper assets.
  • The most important fee you will pay to invest in a Gold IRA is premium. To maximize the return on your Investment you want to pay the lowest premium possible. In general, this means you will be buying Bullion bars and not Coins.
  • Proof and special edition Coins are poor Investments with very high premiums. One of the three common complaints about Gold IRA accounts involves people who purchased these expensive Coins and lost money when they liquidated their account.
  • There are two types of reviews - affiliate reviews and customer reviews. Focus on customer reviews and look for Gold IRA companies that have mostly positive reviews. Avoid Gold IRA companies with customer reviews that mention being pressured into making a decision.
  • There are seven Gold IRA companies that consistently show up on "best" lists. At Gold Well Live we feel that four of those companies are outstanding and that Augusta Precious Metals is the best Gold IRA company overall.

If you have questions about self directed Gold IRA accounts, feel free to contact the team at Gold Well Live. We will do our best to answer your questions and help you make a Precious metals Investment that you will be comfortable with. Also know that the Gold IRA companies have Precious metals specialists who will be happy to answer your questions.

About Me.

After the dot com bubble popped I started researching Financial bubbles - how they evolve, how they pop, etc. I quickly realized that Gold is the only real money on planet Earth and in 2002 I bought my first Gold Coin. I've been investing in the shiny stuff ever since - both physical Precious metals and the Mining stocks. I've also studied the Financial markets, trading, Technical analysis, and the endless games that central banks play with fiat currencies. I do my best to share what I've learned with others - that's what you'll find here on Gold Well Live.

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I'm just a good ol' boy from Texas, but I love to talk about the Precious metals. I share my ramblings with subscribers on a regular basis.

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