Is the Vanguard Gold & Precious Metals IRA Any Good?

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Vanguard, founded in 1975, is one of the most trusted names in investing. With a unique ownership structure in the asset management industry, Vanguard seeks to give investors their best chance for success.

Purchase of platinum, silver, gold, or any other precious metals is considered a way to diversify from more traditional forms of investments and escape their risks.

However, the prices of these precious metals can occasionally be volatile but the price action is often follows predictable patterns.

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About Vanguard's Gold IRA


Unfortunately, Vanguard does not offer gold IRAs, but it indirectly provides exposure to this field through the Vanguard Global Capital Cycles Fund (VGPMX), whose a quarter of its portfolio is invested in precious metals and mining firms.

vanguard's reasons for owning an ira

Why Put Gold in Your IRA?


Individual Retirement Accounts (IRA) protect your retirement as well as your family's financial security.

These special accounts allow you to set aside tax protected savings that you can use in the future.   

With these long term accounts it's important to allocate a significant portion to assets that are solid and reliable, so you have a secure future. 

a couple listening to a financial advisor

You can have cash in an IRA, but that is devaluing at a rapid pace and inflation is out of control

You need an asset that's reliable, retains it's value, and even increases in value over time, and there is no better asset for this than gold. 

With the world's economy struggling through lockdowns, shortages, wars, and inflation, uncertainty has never been higher and investors are protecting themselves by placing physical gold in IRA's. 

A gold IRA investment prospers from these crisis that negatively affect most other assets. 

Risk is knowing the economic dangers and doing nothing to protect yourself and your family. 

Safety is knowing the economic dangers and taking action to protect your financial future, and this easy to do with a Gold IRA.

What is a Gold and Silver IRA?


Gold IRAs, also referred to as precious metals IRAs are specialized individual retirement accounts that permit their investors to purchase gold as their investment for retirement.

Physical metals such as coins or bullion and precious metals-related items can be held in gold IRAs by these investors. 

Although the rules governing distribution and contribution limits in gold IRAs are the same as traditional retirement accounts, these two must be held separately.

These accounts can be established as a Roth IRA, purchased using post-tax monies or pre-tax cash. 

Unlike the other IRAs, these accounts necessitate the purchase and storage of real gold. As a result, gold IRAs necessitate the involvement of a custodian, which is often a brokerage firm or bank that oversees the account. 

You can also use Gold IRA funds to invest in gold-related paper holdings like:

Stock in gold mining companies
Exchange-traded funds (ETFs)
Precious metals commodity futures
Precious metals mutual funds

Please note that the purchase and storage of precious metals translate to other account fees.

Benefits of a Gold IRA


The financial security of your retirement funds is probably top of your mind, considering the unstable times were living in. The advantages of including gold or other IRA-approved precious metals into a retirement plan are extensive and well-documented.

Below are some of the benefits:

  • Diversification

By diversifying their retirement portfolio, investors protect their savings from market volatility. Gold IRAs are one approach to diversify your retirement portfolio, which would lean too much on typical paper assets.

Gold and other precious metals are appropriate for a retirement portfolio since they comprise a long-term, diversified investing strategy.

  • Balance

Gold has historically performed well during times of economic or political crisis as its value continues to be inversely related to the value of paper assets. When standard assets are underperforming, gold does well in contrast.

Similarly, when the market is thriving, the value of gold suffers. This equilibrium, paired with gold's constant value, offers true balance to the retirement portfolio.

  • Stability

In comparison to other assets, gold serves as a gauge of stability. Many investors trust that gold will always be valuable. Gold has always been revered and coveted by humanity throughout history.

Having gold as part of your retirement plan gives your portfolio a sense of solidity and permanence.

ETF vs. Physical Gold


The gold market is extremely liquid. Investors have several options to obtain exposure to this precious metal, including physical gold like gold coins and bars and exchange-traded funds (ETFs). 

Physical gold is the most direct way to gain exposure to gold. Bullion is gold in bulk form, which can be molted into bars or coined into coins. 

Owning physical gold, however, does come with some expenses, including insurance and storage fees and markups and transaction fees when purchasing and selling the commodity.  

On the other hand, unlike physical gold, ETFs can be bought on a stock exchange like shares. 

They allow investors to gain access to gold without incurring the expenses and hassle of storage fees, markups, and security risks associated with possession of real gold.  

Each year, an investor loses a portion of their investment price due to the fund's expense ratio. An expense ratio is a recurrent annual fee levied by funds to pay their management and administrative expenditures.

What Is a Self-Directed IRA?


A self-directed individual retirement account is an IRA that allows investors to hold several alternative investments that are generally restricted in traditional IRAs.

Whereas a trustee or custodian handles the account, it is managed directly by the account owner, hence the name "self-directed." 

man looking at a clipboard

Self-directed IRAs are suitable for investors who fully acknowledge the perks of diversifying investment and would like to divert in a tax-advantaged account. They are available as either a traditional IRA or a Roth IRA. 

Self-directed IRAs enable you to save enough for retirement with assets not permitted in traditional IRAs, such as holding physical precious metals, cryptocurrencies, and real estate.

How Does a Gold IRA Work?


A gold IRA, or a precious metals IRA, is an Individual Retirement Account that holds in custody actual gold or other permitted precious for the account owner's benefit.

It operates similarly to a traditional IRA, except that it holds real bullion coins or bars instead of paper assets. 

cartoon of woman looking at taxes and a calculator

Like any other retirement account, you will invest your retirement money in your Custom Precious Metals IRA or Gold IRA based on specified tax treatment, whether after-tax or pre-tax, then make withdrawals in the future.

The beneficiaries continue to receive quarterly statements and log in online to check their balances with their gold IRA.

Types of Gold IRA Accounts


Gold IRAs come in different forms, namely:

  • Traditional Gold IRAs

These retirement accounts are financed by pre-tax contributions, which means that investments and any earnings grow tax-free. The Retirement withdrawals are, however, taxed.

  • Roth Gold IRAs

Roth gold IRA Contributions are made after-tax monies, so there is no immediate tax benefit. When it comes time to start drawing payments in retirement, you will have to pay taxes.

  • SEP Gold IRAs

Like ordinary SEP IRAs, SEP gold IRAs are available to small firms employees or self-employed people. You only get taxed on your withdrawals during retirement and not on your contributions.

What Precious Metals Are Eligible for Gold IRAs?


The IRS does not allow for the inclusion of just any kind of gold or precious metals. The metals you wish to invest in must meet the IRS's purity standards.

The IRS has accepted four precious metals for IRA investments: gold, silver, platinum, and palladium. Below are the standards of purity required:

  • 99.5% pure Gold
  • 99.9% pure Silver
  • 99.95% pure Platinum
  • 99.95% pure Palladium

IRA Approved Coins


With each metal, gold, silver, platinum, and palladium, the IRS only permitted a few forms of coins, bullion, bars, and rounds, that met IRS-issued fineness requirements for precious metals goods. 

Gold

  • American Eagle bullion and proof coins
  • Australian Kangaroo/Nugget bullion coins
  • Australian Lunar Series coins
  • Austrian Philharmonic bullion coins
  • British Britannia (2013 and newer)

Silver

  • American Eagle bullion and proof coins
  • America the Beautiful coins
  • Australian Kookaburra coins
  • Austrian Vienna Philharmonic coins
  • British Britannia (2013 and newer)

Platinum and Palladium

  • American Eagle platinum coins
  • American Eagle platinum-proof coins
  • Canadian Maple Leaf coins in either platinum or palladium
  • Platinum and Palladium bars and rounds made by a COMEX or NYMEX approved refinery.

How to Fund Your Gold IRA


After completing your application and opening your self-directed IRA open, funding has never been simpler. It is straightforward and can be accomplished through one of three methods. 

IRA Transfer

  • You can fund your gold IRA via an IRA to IRA transfer by completing a Transfer Request Form. Such a transfer is done tax-free and without penalty.

Rollover

  • Another tax-deferred approach to finance your self-directed IRA is through a direct rollover from other eligible retirement plans or a 401(k) account.

Cash Contributions

  • The self-directed custodian can take either a check or a wire transfer to fund your account with cash. The taxable status of the IRA account is determined by whether it is pre-tax or after-tax.

Depository Storage Facility for IRA


A depository for precious metals is a third-party storage facility where customers can keep their precious metal assets.

They are housed in a high-security location that is fully insured against any damage, loss, theft, or other liability with depository storage.

gold coins protected by a lock

These storage facilities are fitted with cutting-edge security measures and equipment such as a 24-hour monitoring system, timed locks, automatic relocking, motion, vibration, and sound detectors.   

The IRS requires that gold and other precious metals in a retirement account be kept in the custody of a custodian certified by IRS at a third-party storage facility until the monies are removed when the account holder reaches the predetermined retirement age.

IRA Withdrawal Rules


The same rules apply to gold IRAs as any other IRA. The IRS will levy a ten percent penalty if you withdraw from your IRA before reaching the age of 59 ½.

The rationale for this consequence is that retirement accounts are typically invested using pre-tax dollars, which means they are not taxed. 

When you reach the age of 59 ½, you can begin taking withdrawals, but you may choose not to withdraw until you reach the age of 70 ½, at which point you must take the minimum withdrawal each year. 

Required Minimum Distributions (RMDs) must begin during the year you turn 70 ½ and must be completed by December 31 of each year.

IRAs owners must take the necessary amount of RMDs on time each year or suffer harsh penalties. Your Self-Directed IRA helps calculate and provide your annual RMD amount.

Are There Alternatives to a Vanguard Gold IRA?


Yes.  We have researched gold and precious metals IRA's extensively here at BMOGAM Viewpoints and we have come up with two companies that match out requirements for safety, customer service, and quality.

1. Goldco is our top choice to protect your savings with precious metals.  You can learn more about them by reading our Goldco review.

2. Augusta Precious Metals is our second best choice for folks looking to diversify their retirement with precious metals.  You can learn more about them by reading our Augusta Precious Metals review.

Conclusion

Gold IRAs are a great way to diversify your retirement investment and avoid the risks that come with traditional investments.

We hope this article has given you insight into what gold IRAs are, the different account types, and how they work. 

We all need to be financially secure when retirement comes, which is what diversifying your investments to gold and precious metals offers.

Vanguard is not a bad company, but they do not offer IRAs that can hold physical precious metals.  

They are not a scam, but they aren't the best choice for gold investments and certainly not IRA's, like other companies we have written about on this website.

You can get a Free Gold Investors Guide from our top gold and precious metals company recommendation by clicking the link above or you can read our article of the top companies we reviewed this year:

>> CLICK HERE to read our list of the top gold investing companies. <<

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