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Vanguard is one of the most trusted and highly recommended places to invest your retirement savings. But unlike many institutions, they don't offer a gold IRA.
Gold has been around for centuries as a form of currency, and many investors see it as one of the safest investments they can make. However, as far as retirement plans go, institutions like Vanguard tend to focus more on stocks and other investment vehicles. That doesn't mean you can't invest in gold with them – it just means that you have to take a different approach.
While you can invest in gold bullion through a regular retirement account, you won't be able to hold it in your self-directed IRA or 401(k). That's because precious metals aren't considered part of a retirement account, unlike traditional investments.
Another way to get gold into your retirement plan is to open an Individual 401(k) plan. This will allow you to invest in precious metals like gold bullion as part of your retirement savings plan. But it comes with some added complications and rules you'll want to consider before investing in such an account.
The first thing to know about Individual 401(k) plans is that they are a relatively new type of retirement savings plan. They were launched in the U.S. by the federal government in 2005, but they have only been around for less than ten years.
While they are designed to give employees more control over their investments, many people who have them have been put off by some of the traditional limitations that come with them – like mixing their 401(k) and IRA accounts in the same account, which can lead to a high number of ERISA violations.
To open an Individual 401(k) account, you'll need to have completed a Roth IRA rollover – where you transfer your traditional IRA into a Roth IRA – or have already opened a traditional retirement plan. In most cases, you'll also need to be over the age of 21 and have earned at least $5,000 in income in the past year.
Once these criteria are met, your employer will ask you to fill out some paperwork and sign a few documents before they will open an Individual 401(k) for you. The main benefit of an Individual 401(k) is that it allows for more flexibility than other retirement accounts.
Why Put Gold in Your IRA?
Many people who have Individual 401(k) plans invest in gold that way because of the reduction in taxes. Investment companies must pay ordinary income tax on all gains, but anyone with a traditional retirement account can avoid that. If you have an Individual 401(k) plan, you'll be able to hold your gold and precious metal as part of your retirement savings plan and not have to pay extra taxes.
For one, you'll be able to control the costs and risks of your investments better. Investments outside the traditional retirement accounts will help protect you from market gyrations when prices are low.
It'll also give you more control over how you invest your money. This can be a good thing if you believe that gold is going to rebound in price (and it has been a favourite stock for many investors) or if other metal prices are on an upward trajectory – but it's not going to make much difference in prices if they're flat or falling (like they were during the 2008 recession).
Another benefit of having gold as part of your Individual 401(k) plan is that it can help diversify your investments. Over time, most of the gold you hold will be in the form of investments like ETFs or mutual funds, which can often replicate several different shares of precious metals. This can help provide liquidity when adjusting your portfolio if market prices go up or down.
Many 401(k) holders will also allow their gold to go into a self-directed IRA – referred to as an "excess" rollover. This can be a great option for anyone who wants to hold gold bullion with their retirement account but doesn't want to pay capital gains tax on it. Since you're transferring your money from a traditional retirement account, you'll be able to avoid capital gains taxes on your investment.
If the gold is held in a self-directed IRA, ownership of the gold will remain in the hands of the IRA owner. This means you'll be able to sell it without being taxed on any profits that come from doing so. Suppose you're going to take this route, though. In that case, it's important to remember that your self-directed IRA is still subject to the same rules as any other retirement savings plan – including ERISA guidelines that prevent you from mixing different investments into the same account.
Whatever method you use to invest gold in the IRA will provide a small benefit over holding it as part of a traditional retirement account. But remember that it's only suitable for some and that the IRS recognizes it as an investment option.
To calculate how much you can save over time, we looked at how much an Individual 401(k) account would be worth if invested in gold bullion vs. a standard benchmark – like the S&P 500 – using both chains of value.
To qualify for an Individual 401(k) plan, you'll need to have completed a Roth IRA rollover (if rolling your money into one). If you have a Traditional IRA, you can't deposit gold before doing a rollover into an Individual 401(k).
The Individual 401(k) will allow you to avoid paying taxes on the profits from that investment. However, if you leave that money in the account for too long, it can count against your contribution limit for other retirement accounts – like Traditional IRAs and rollover IRAs.
The S&P 500 is an ideal benchmark for anyone who wants to compare how their Individual 401(k) investments would fare against other traditional investment vehicles, like mutual funds or managed accounts. By looking at how much the S&P 500 outperformed gold in 2013 and 2014, we can get a good idea of how much the investments could grow in value by putting them in an Individual 401(k) plan.
Regardless of what type of retirement plan you have or what type of account you end up choosing (either a traditional IRA or an Individual 401(k)), it's important to remember that you'll need to pay taxes on any money that you withdraw from your account.
According to the IRS, you have a choice of rolling over your Individual 401(k) into a Traditional IRA or withdrawing it and facing the taxes on the gains.
Some extra steps and rules must be adhered to for those who choose to roll over their Individual 401(k) account. If you choose this route, gold will not be considered a taxable event because you'll be able to transfer your money from an individual retirement account into either an IRA or another retirement account as part of the process.
When withdrawing gains from your Individual 401(k) account to avoid taxes, you'll need to do so based on how long you've been investing. The IRS has a chart of how long you should hold onto your money before you can withdraw it without any taxes.
If you choose to roll your Individual 401(k) over into a Roth IRA, the metals won't be taxed on the gains, and the proceeds from selling gold will be tax-free. That being said, it's important to remember that the gold that's in the Individual 401(k) will no longer be considered an investment option for the IRA owner and that those funds must revert to Physical Gold IRA accounts.
Is There an Alternative to Vanguard
Since Vanguard does not offer a gold IRA, this article discusses an alternative company to replace it instead.
Investing in Goldco is a quick and easy way to purchase gold bars and coins to have them as part of your IRA pension. For example, you can buy 20 LB bars of gold at the current market price and have it included as an actual investment – this gives you an instant profit of 4% in just one year.
Gold investing with Goldco is suitable for both beginners and experienced investors as it includes a wide range of options and benefits, such as free long-term storage, free bullion appraisals, tax-free gold sales, 24X7 customer support, and import taxes on the purchase of foreign gold.
Pros & Cons of Goldco
Why Invest at Goldco?
If you're looking for a simple option for metals investment, Goldco is the best alternative for you. The company has a high level of security in storage facilities and vaults that are also insured by Lloyds of London and the U.S. Mint, thereby ensuring the safety of your precious metals.
Goldco also provides free bullion appraisals that are non-binding and have no legal force but can help investors determine the market value on value of their metals.
Goldco offers three different options on how you can invest your precious metals:
Is there a way to invest in gold without buying gold?
Gold loans and Gold Futures fall into this category. They are derivatives, not physical assets, but they allow you to take advantage of the value of gold without taking ownership. Such investments can be riskier than their physical counterparts and should be done with care.
Is it possible to buy gold on margin?
The answer's yes, but at a higher degree of risk. Unlike stocks and bonds, most investors won't be familiar with the intricacies of futures trades, or the other financial instruments used to trade them.
Can I pay with a check or wire transfer?
Yes, as long as you have the funds in your account. However, remember that fees may apply if you pay with a check or wire transfer.
Can I store gold bullion in an Individual 401(k) before converting it into an IRA?
Yes, but you'll need to ensure that the gold bullion will be covered by IRS Section 408(m). You can consult a tax advisor for more information on this subject.
Why choose Goldco if my local bank offers Gold IRAs?
Gold coin and bullion dealers tend not to offer IRAs because they have other clients who depend on their services. Banks are even less likely to give gold IRAs since they deal with larger amounts of money that don't usually include gold coins or bullion in their portfolios.