Gold IRA, Anyone?

[goodasgold]

I know the PP book discourages holding gold IRAs, but does anyone do it, either as an ETF or as an American Eagle IRA? I am giving some thought to doing this with a portion of my gold allotment.

The thought of paying that @*%! 28% rate when cashing in  the physical yellow stuff just annoys me.

[MachineGhost]

If you mean gold in an IRA, then yes, I have some IAU in one of my IRAs. I find holding gold ETFs in taxable accounts to be a big pain, between form 8621 for GTU and/or the share expenses affecting cost basis with GLD, IAU, SGOL, etc., not to mention the unfavorable tax treatment as a collectible.

If only discounted variable annuities had physical gold as an option....  one can always dream.

[smurff]

The custodians/administrators that take care of self-directed IRA accounts charge hefty quarterly or annual fees, usually a percentage of the total account value, but minimums apply.  Having an IRA custodian puts at least one counterparty between you and your gold.  That's one reason physical gold's not recommended for IRAs.

Since gold does not pay dividends, interest, or other income, it takes up tax-deferred space in an IRA that might go to PP assets that do, like stocks or bonds, or VP assets like real estate.

Yet, there are exceptions to every rule.

[MachineGhost]

You could minimize the counterparty risk by setting up a LLC that is owned by the IRA and have the LLC own the gold in a vault or box.  The IRA custodian/trustees won't have direct access or ownership over the gold.  Use your imagination.

But as smurff points out, the real problem is the fees.  The "Expanded IRA" isn't a very competitive market yet.

[Libertarian666]

I believe corporate profit sharing plans can hold physical gold.
Note: I am not a tax or retirement plan expert. Do your own due diligence.

[smurff]

Check out this fee schedule fir the Entrust Group, a well-established  custodian/administrator.  Click on the General Fee Disclosure, and you can download the list to get an idea of the kinds of fees charged.  You have the option of fixed per-asset maintenance fees for large asset balances vs. percentage fees with minimums.  These are annual fees--you get to pay them each year:

http://www.theentrustgroup.com/forms

And don't forget the $95 fee you pay per asset each and every time you buy or sell.  Even taking a distribution costs a minimum of $5. It costs $50 just to set up an account.  You can easily pay $340 in fees your first year, provided you only do one transaction.  That does not include any premiums on the gold or coins. How many 1/10 oz coins or French Angels can you buy outside the IRA for $340?

Different companies have different fee schedules. Some will cost more fees, others cost less.  YMMV.

[AgAuMoney]

You could minimize the counterparty risk by setting up a LLC that is owned by the IRA and have the LLC own the gold in a vault or box.  The IRA custodian/trustees won't have direct access or ownership over the gold.  Use your imagination.

What you describe sure sounds like a "prohibited transaction" that would get the entire IRA reclassified as a taxable account with all taxes and penalties due immediately.  Either that, or what you describe is pretty much what the "physical gold" IRA trustees already do, except they do it without the additional overhead of having to form and staff an LLC for your IRA.  (Which LLC, by the way, as the owner of the gold, would have ownership over the gold and access to it.)

Pretty much everything I can imagine either costs a whole lot and has security concerns, or runs afoul of the arms length issues necessitated by IRAs.

[AgAuMoney]

The thought of paying that @*%! 28% rate when cashing in  the physical yellow stuff just annoys me.

Taxes suck.  But if you wrap your gold in an IRA you get to pay lots of fees and deal with changing gov't rules and maybe pay tax at regular income rates in the future.  Best is to avoid selling so much physical, so often.  And maybe consider taking trips outside the country to store your gold as recommended.

[smurff]

I went back and reread goodasgold' s original post.

Holding gold in ETF form within an IRA is easy to do, without the high fee or self-dealing issues of a physical gold IRA. It's been put forth as one reason ETFs have grown so much over the last few years--its easy to deal with them in a brokerage account, which is what most IRAs are.

Many PP investors who hold physical gold keep a small percentage of the gold allocation in an ETF in a Roth IRA for balancing purposes.  That way there are no taxes involved. And the only fee would be the $7.95 or $9.95 TDAmeritrade or Fidelity charges for a buy-sell transaction.

[Pointedstick]

And the only fee would be the $7.95 or $9.95 TDAmeritrade or Fidelity charges for a buy-sell transaction.

Or $0 for SGOL with Schwab! 

[MachineGhost]

What you describe sure sounds like a "prohibited transaction" that would get the entire IRA reclassified as a taxable account with all taxes and penalties due immediately.  Either that, or what you describe is pretty much what the "physical gold" IRA trustees already do, except they do it without the additional overhead of having to form and staff an LLC for your IRA.  (Which LLC, by the way, as the owner of the gold, would have ownership over the gold and access to it.)

It's not a prohibited transanction until the point you personally pilfer the gold out from under the auspices of "your" very own LLC.  But in that case, are you really going to give two shits?  We'd be in the apocalypse or near-abouts if you had to go to that extreme and worrying about the paper tiger IRS would be the least of anyone's concerns.

And if the LLC was foreign and the vault was offshore...

[MachineGhost]

Or $0 for SGOL with Schwab! 

I took a closer look at Schwab's "free" offerings last night.  It's very overrated.  The funds suck and are not the best nor the lowest cost.  You will spend FAR more in annual management fees than the pittance of a one-time comission.  Even SGOL is not the cheapest paper-gold option (they all use roughly the same custodians or storage facilities so its mostly smoke and mirrors).

[Pointedstick]

Or $0 for SGOL with Schwab! 

I took a closer look at Schwab's "free" offerings last night.  It's very overrated.  The funds suck and are not the best nor the lowest cost.  You will spend FAR more in annual management fees than the pittance of a one-time comission.  Even SGOL is not the cheapest paper-gold option (they all use roughly the same custodians or storage facilities so its mostly smoke and mirrors).

SGOL is 0.4% versus IAU's 0.25%, that's true. With a 0.15% difference and one trade per month to add new funds, the break-even point for moving to IAU is with a $64,000 position. Fewer trades tips the balance toward IAU sooner of course.

As for the others, SCHB's ER is 0.04% compared to 0.05% for VTI and SCHO's ER is 0.08% compared to 0.15% for SHY.

Now you might not like SCHB or SCHO as much as VTI or SHY (I prefer the latter two myself), but they do indeed look like the cheapest to me.

Now TLO is another story but I wouldn't touch that with a ten-foot pole, especially since Schwab lets you buy treasuries commission-free in $1,000 increments. No readon not to just buy the real things. You could do the same with T-bills and avoid SCHO as well if you really don't like it.

[MachineGhost]

Now you might not like SCHB or SCHO as much as VTI or SHY (I prefer the latter two myself), but they do indeed look like the cheapest to me.

I stand semi-corrected.  I was viewing it in terms of factor tilting since I view market-cap weighting as stupid.  From that perspective, Schwab has relatively poor and expensive choices.

Also, I had mentally wrote off using Schwab for Treasuries because you can't sell without calling them.  Fidelity is looking better at this point.