So should I add a gold IRA to my short list for an inherited retirement account?
There’s usually a certain amount of paperwork that comes along with an inherited retirement account. There’s a folded statement, there’s a letter about a beneficiary in a manila envelope, and there might be a plan number printed next to a coffee stain. Before picking up the phone to speak with a custodian, it is important to distinguish between a market question and an account administration question.
You might get useful information to answer the former from a financial news and quotes service – prices for gold, for instance, as well as stocks of mining companies, bonds, and so on. The news service won’t tell you what you can do with your inherited funds, however.
Account Rules
First, examine the paperwork for your inherited account. Determine what type of account you inherited prior to examining any charts for gold. The rules governing distribution and transfer vary between an inherited employer-sponsored plan, a traditional IRA, a Roth IRA, and an inherited spousal IRA.
This designation may be found in the upper-right corner of a quarterly statement or on a yellowed label affixed to a dusty file folder. You should also determine whether the account is at the original institution, whether required minimum distributions have begun, and whether there is a deadline for beneficiary distributions under the plan document.
A direct transfer is handled differently than receiving a check for a distribution and then rolling over. The 60 days to deposit proceeds from an indirect rollover can be very important and far outweigh any wild one-week fluctuation in the price of gold. So first, can you make such a transfer anyway?
Market Research
Here are three market questions that you will want to ask your custodian when you call. Have a handy place to record notes – not just a bunch of browser tabs open – with dates, price action, and anything else going on in the markets – more on Yahoo Finance if you want that route. What happened to gold prices during the most recent period of inflation and subsequent rate cuts?
Examine a long-term chart of gold prices, highlighting periods of high inflation data, rising interest rates, and changing rate cut expectations. Don’t simply focus on a single green candlestick on a chart but also examine the months leading up to the move and those following. Gold can move up during periods of anxiety, remain relatively flat while other asset classes rise, or fall despite generally positive news coverage.
It can be helpful to view the chart of gold in context with the chart of a broad equity index, bond yields, and an exchange rate (if available). The chart of the yellow metal might appear relatively flat on a smartphone display, but you still need to think about how cash flows from an inherited account work.
Do you really want a mining ETF to substitute for physical gold? On some days, a mining-stock fund and physical bullion might start the morning moving up together, then diverge by midday. Producers have fixed costs, debt, union contracts, resource estimates, and the physical reality of lifting rock out of the ground. A delayed shipment, a strike, or a permitting delay can drag a company’s stock down even while the spot price climbs.
Review a fund’s holdings and its expense ratio carefully. Some hold just a few major miners; others hold junior explorers with low liquidity. This is equity ownership, not bullion stored in a vault.
Current Sector Drivers
Don’t focus only on the top headline that mentions the price rising. The move could be tied to a rate decision, a softer dollar, central bank purchases, a mine closure, or a spike in inflation expectations. Look past the big chart to see if the day’s note is about a quarterly report, an earnings call, or the expected path of interest rates.
Keep a few dated headlines around. If the same story shows up week after week, it may have already been factored into the current price.
Chart Limitations
Charts and news articles help with research, but they can’t read the IRA paperwork in your filing cabinet. Before opening a self-directed IRA, make sure the custodian or CPA clarifies a few things:
- Can the inherited IRA be transferred, or does a mandatory withdrawal have to occur first?
- What are the total costs – initial fees, annual fees, storage, and transaction markups?
- What coins or bars are eligible for the IRA? A commemorative coin in a display case may not be allowed.
- Where will the metal be stored, and is storage allocated or commingled?
- How will taxes, inheritance rules, and reporting work in my situation?
Get those details in writing, with dollar amounts and timeframes. A marketing brochure may say “storage included” at the bottom of page five while skipping the annual fee entirely.
Another item of note is the quote. If the price is taken while the market is open, it could be a futures quote and not the dealer’s bid or ask for an IRA-qualified bar. Look at the date and time of the quote, the contract month and the currency before including it in your research file.
If you are waiting on an inherited-account distribution, find out how they value and sell the metal. The spread and any minimum amounts or delays in settlement will have an impact on the proceeds that can be withdrawn.
Research Summary
You’ll get better answers from the custodian if you walk in with a single page rather than a stack of screenshots. List the account type, existing custodian, whether it’s inherited, any required withdrawal deadlines, and the three questions you asked above. Also include the date on your most recent statement – an old statement might reflect a different balance.
For a Gold IRA, there’s the paperwork and the personal decisions left to make: is the account eligible, are the fees reasonable for the amount invested, and does gold belong in the overall mix of an inherited account? Have your account documents, fee schedule, and latest statement on hand when you request the transfer.