Gold has long been used as an asset class to diversify retirement savings strategies, as its historical ability to protect wealth against inflation draws the interest of investors for centuries. Now comes a question for SIMPLE IRA holders – can this account hold gold? We explore this matter further to get our answer.
Before we delve into our topic of inquiry, let’s quickly define a SIMPLE IRA. A SIMPLE IRA is an employer-sponsored retirement plan offering both employer and employee contributions – it was developed especially to meet the needs of small businesses with 100 or fewer employees who do not already have another retirement plan in place.
Can an Individual Retirement Account Hold Gold?
Yes, a SIMPLE IRA can invest in gold. But, there are certain key specifications and considerations.
Physical Gold Vs. Gold Stocks: Not all gold investments are equal. A SIMPLE IRA makes investing in mining stocks, mutual funds, and exchange traded funds easy – however if you prefer holding physical gold (such as coins or bullion) then additional steps must be taken in order to comply with regulations and meet specific criteria.
Depositories Approved by IRS: Physical gold in a SIMPLE IRA cannot be kept under personal management; rather, it must be stored with an IRS-approved depository that guarantees its safety and compliance with IRS standards.
Approved Gold: Not every gold coin or bullion meets IRS purity requirements to qualify as eligible investments in a SIMPLE IRA account, specifically fineness of at least 0.995 and higher; popular products, like American Eagle coins, often meet this threshold; however it’s wise to always inspect its purity and authenticity prior to putting money in an IRA account.
Establish a Self-Directed SIMPLE IRA: Traditional SIMPLE IRAs do not permit direct investments into physical gold; in order to do so, self-directed SIMPLE IRAs offer more investment flexibility and may allow direct purchases of such assets.
Potential Fees: Owning physical gold in an SIPLE IRA may come with additional fees that include storage charges at the depository and administrative charges from its custodian, so it’s crucial that investors consider all costs involved before considering this investment option. It is therefore imperative to remain aware of potential fees before investing.
Pros and Cons
Like any investment, holding gold in an Individual Retirement Account has both its own set of advantages and drawbacks.
Pros of Gold Investment
- Diversification can protect investors against market volatility and inflation by serving as a hedge. Historical Preservation of
- Wealth: Historically gold has served as an effective store of value over millennia.
- Tangible Asset: Physical gold provides some investors with peace of mind. Contras of Physical Gold: Wage Inequality is another potential risk.
- Storage Fees: Physical gold incurs storage fees unlike stocks or bonds which do not. No Dividends or Interest: In contrast with stocks or bonds, gold does not generate dividends or interest as other forms of investments might. Price Fluctuations:
- While investing in physical gold may provide protection from financial uncertainty, its price fluctuation makes investing a risky proposition.
Although SIMPLE IRAs can hold gold investments, it’s critical that investors understand all of its rules, costs and potential advantages before diving in. When done right, investing in gold within a SIMPLE IRA provides diversification while adding tangible assets into one’s retirement strategy – always consult a financial advisor or tax professional prior to making any definitive investment decisions.