USAA Gold IRA: Is This a Good Investment?

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USAA stands for United Services Automobile Association. The company was founded in 1922 with headquarters located in San Antonio, Texas. It is a provider of financial services through its subsidiaries. Services include banking, investing, and insurance.

These services are designed for people in the United States Armed Forces, both active members, and retirees.

However, the general public can also use their brokerage services. Members of USAA can take care of most of their financial needs, including their banking, mortgage, insurance, and investing needs, with just one company.

But the question investors seeking to protect their savings from the ravages of inflation want to know is: does USAA offer an IRA that is allowed to hold physical gold and silver?

Before we get started with this review:

With so many gold companies out there, how do you know which is the best to invest with?

At Exim Bank India we've spent years researching nearly every gold and precious metals company in the business and report to our readers on the very few that worth investing with.

Our goal is to give you the best information you need to make an informed decision.

That is why we created a list of the best gold investment companies from our extensive research, and you can use this list to help you make the best choice.

>> CLICK HERE to read our list of the Best Gold IRA Companies <<

Find out if USAA made it on our "highest recommendation" list this year!

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About USAA

usaa website

Over the years USAA has grown from small town beginnings into a large business enterprise that offers all types of financial instruments.

Unfortunately, USAA has not kept pace with their customers desires.  

More and more investors are seeking to protect their wealth with tax-advantaged IRAs that can hold physical precious metals and USAA does not offer these special accounts.

That is why Exim Bank India spent a great amount of time researching the very best gold IRA companies that can help investors with these types of accounts.

Only 7 companies were good enough to make it on our list of the top gold IRA companies which you can read: here

Or, if you want to just know our #1 recommendation, it's Goldco.

If you'd like to learn more about Goldco, you can read our complete Goldco Review.

What are Gold IRAs?

A gold IRA is a special type of IRA account where you can hold physical gold or financial instruments related to gold as an investment in your IRA account. You can hold the precious metals in your account until you are ready to withdraw them.

You can transfer funds that are already in your regular traditional IRA or Roth IRA to your gold IRA. The gold IRA is a self-directed IRA. You can use these funds to invest in precious metals. 

Investors can request a distribution from their regular retirement account to purchase physical forms of precious metals like gold and silver.

Investors who have self-directed IRAs, can buy shares of an exchange-traded fund that is related to gold and hold that in the IRA account. If they take a distribution, they can use the money to purchase physical gold.

Only certain precious metals are eligible to be kept in IRAs. These include gold, silver, and platinum. Investors can have up to 100 ounces of precious metal in their IRAs.

Advantages of a Gold IRA

  • No Capital Gains Tax

A regular purchase of physical gold or bullion is subject to capital gains tax because precious metals are a taxable investment. However, if the gold is purchased through an IRA, this is not subject to capital gains tax.

To avoid paying this tax on their return, the gold or bullion must stay in the IRA for a minimum of one year.

From the perspective of the IRS, the gold in a self-directed IRA is tangible property. Gold that is purchased through a self-directed IRA is considered an investment.

The money that is invested is not treated the same as money that is used for other purposes, like money that you gain from selling stocks and bonds or money used to pay expenses.

  • Growth that is Tax-Deferred

Gold that is held in an IRA can grow, and the growth is not taxable until the investor takes a distribution from the IRA. Historically, gold has proven to be a good investment in the market. Therefore, holding gold in an IRA is a sound investment decision.

  • Distribution that is Tax-Free

The gold must be held in the IRA for a minimum of five years before the investor can take a distribution.

Because the IRS considers any assets held in a self-directed IRA as tangible property, the gold qualifies for tax-free distribution. Investors can make an IRA transfer and get tax-free income from the assets in their gold IRA.

  • Preserving Wealth Through Inflation and Deflation

Gold and silver can be a hedge against economic instability. While inflation increased and prices of goods started to rise, gold's value remained constant.

In deflationary times, the value of investments may go down, but gold remains constant. Purchasing power can diminish from insufficient demand for goods and services. The supply of gold is rather limited, and this adds to the value of the metal.

Gold IRA Rollover Explained

You can make a gold IRA rollover by moving funds in your regular retirement account into a self-directed IRA that can hold physical metals. Physical gold is in the form of coins, bullion, or bars. These are kept in an approved, secure depository.

Physical Gold vs. ETFs

ETF stands for exchange-traded fund. It is an investment where an asset is divided into individual shares that are held by someone. The shares can be traded like stocks. An ETF can hold precious metals, bond funds, and emerging markets.

If an investor buys a gold ETF, they buy a share of the physical gold. For security reasons, fund managers do not reveal information about account holdings. 

Physical gold is held in the name of the custodian. The physical gold is stored in the vault of the bank or an approved storage facility with trained staff.

If gold is purchased through an IRA, the investor can contact the custodian to pick up the gold and arrange to transport it to the approved gold depository.

The primary difference between physical gold and an ETF is the expense of owning physical gold. Holding gold in an IRA is less costly than buying an ETF. Because gold is rare, it is not that easy for an investor to sell it on the market to make a profit.

Physical gold is often used as a hedge against inflation.

Gold ETFs are traded on the stock exchange after the fund's sponsor establishes the prices of the original issue.

The price of gold is established by the futures contracts. When an investor buys several shares of the gold ETF, this entitles the investor to a corresponding amount of gold or bullion. The prices are determined by the value of the assets in the fund.

These assets are maintained by the custodian in an allocated account for the shareholders.

Self-Directed IRA Explained

A self-directed IRA also referred to as an SDIRA, is an IRA that allows account owners the flexibility to make their own decisions on what assets to invest in. These are not limited to paper assets like stocks, bonds, and mutual funds.

The types of eligible assets are non-traditional, and there are more than 100 types that qualify to be held in a self-directed IRA. Some of the more popular choices for SDIRAs include precious metals, notes and loans, real estate, and private businesses.

Providers of self-directed IRAs have their ways of offering their investment opportunities. Some of them provide a list of investments and asset classes that are approved. This list might include precious metals.

Other SDIRA providers customize special investment portfolios based on the requirements of the individual investor.

How a Gold IRA Works

A gold IRA has three main components: the beneficiary, the custodian, and the trustee

The beneficiary has the right to withdraw funds from the account throughout his life. Income that is generated by the fund's assets goes directly to the beneficiary.

The custodian has the role of keeping the physical assets safe in the gold IRA. The trustee supervises the investing of the IRA, manages the IRA's investments, and oversees the transactions.

They keep a record of the investors of this account and report on them as needed.

Different Types of Gold IRA Accounts

Traditional Gold IRA

In a traditional IRA, you can defer taxes on the money that you invest into your IRA. You pay taxes on this only when you withdraw from the funds during your retirement years.

With traditional IRAs, you decide whether you want to take the required minimum distributions or RMDs or withdraw the money tax-free.

The IRS lets you contribute a maximum of $5,000 into an IRA. If you are not eligible to contribute to an IRA, you can contribute to a non-qualified retirement plan like a 401(k) or a 403(b).

SEP Gold IRA

A SEP IRA is a Simplified Employee Pension Individual Retirement Account. This IRA lets you use your earned income to invest in the IRA. It offers tax advantages because the income that you contribute is not considered taxable income for the year.

You can reduce the amount of taxable income for the year. You can use this method to meet your savings goals and make the most out of the tax advantages that come with an IRA. It is a good approach to saving for retirement.

Roth Gold IRA

Roth IRAs are funded by post-tax dollars, and the money is allowed to grow tax-free. Unlike a traditional IRA, you are not bound by a minimum distribution period.

You are not required to take a distribution from a Roth IRA even after you reach 70 1/2 years of age. This is one aspect that is different from a traditional IRA. Another aspect is that your investment in a Roth IRA grows tax-free.

The distribution will not be subject to taxes if certain requirements are met. Roth IRAs are funded by after-tax dollars. This means the amount you invest is not tax-deductible for the tax year.

What Precious Metals Qualify as Investments for Gold IRAs?

  • Gold

Gold is a popular investment choice for IRA accounts. Historically, gold has performed better than other types of investments in the stock market. Gold prices have been rising steadily over the years and are a fairly solid investment.

Because of this, gold has positive effects on the prices of other assets.

Examples of gold investments include:

- American Eagle coins

- Austrian Philharmonic coins

- Canadian Maple Leaf coins

  • Silver

Silver is another popular choice for investors of self-directed IRA accounts. Silver investments contain almost 80% of their weight in metal. Like gold, it is a sound and stable investment. Silver is also good protection against inflation.

The price of silver behaves like the price of gold. During inflationary times, the price of both precious metals tends to rise.

Examples of silver investments include:

- Australian Kookaburra coins

- Canadian Maple Leaf coins

- Mexican Libertad coins

  • Platinum

Another precious metal suitable for investing in an IRA account is platinum. It is similar to gold in terms of investment characteristics. It has high marketability with a premium price point.

If your portfolio includes assets that have high value, or if you have big investments, platinum would be a good choice for diversification.

  • Palladium

Palladium is another precious metal that is suitable for gold IRA accounts. Like gold, silver, and platinum, it can be used to protect the value of your portfolio against inflation. Palladium provides stabilization when the market is volatile.

For investors who prefer less risk, palladium is a good investment choice.

Coins Approved for IRAs

The IRS only approves certain coins to be acceptable investments in an IRA. These coins are listed in IRS Publication 590. The list is updated each year. 

The approved precious metal coin investments include gold, silver, platinum, and palladium bullion in the following coin series:

- American Gold Buffalo coins

- Austrian Gold Philharmonic coins

- Australian Gold Kangaroo coins

- Valcambi Gold Bars

- Royal Canadian Mint Gold Bars

Funding Your Precious Metals IRA

Cash

You can contribute to your gold IRA by depositing approved gold coins or other physical gold assets with the custodian.

Physical gold or gold coins must make up 20% of your total contributions to your gold IRA. Your gold IRA custodian will provide you with a statement documenting every asset that was purchased with your funds.

This information is helpful if you decide to sell some of the precious metal assets before they are vested.

Rollover

If you have funds in another IRA, you can roll over those funds into your gold IRA. You must close the original account before the transfer of funds begins.

Part of the procedures also includes the completion of some paperwork. After this is done, the fund transfer can start.

IRA Transfer

If you move your gold from one IRA to another IRA, the gold IRA custodian must complete Form 1099-R and Form 1099-INT for the transaction. This additional paperwork can take several months to process.

Depository Storage Facility for Gold IRAs

A depository storage facility, or DSF, is an entity that provides secure storage solutions for physical gold, silver, or platinum bullion. This is not a bank where you can get other services like currency exchange and trading.

A DSF can only serve as a depository for precious metals where they can be kept safe and protected against loss or theft.

The DSF will offer you a choice between storing your gold in vaults located in the United States or vaults located overseas. The overseas option has advantages because the American dollar has been stable throughout the years.

The value of gold and silver has been steadily rising, and they will continue to rise over the next decades. Other countries like Canada, Australia, and Switzerland have solid and stable currencies. These countries would be ideal choices for precious metal storage.

Commingled vs. Segregated Storage

Deposit storage facilities can segregate storage or commingle them. In segregated storage, the assets of each account are stored separately from the others. This is suitable for investors who do not wish to expose their money to the assets belonging to other investors.

Segregated storage has higher minimums. In commingled storage, your assets are stored in the same location where other clients store their assets. This is ideal if you want the ability to quickly add or withdraw assets.

Rules of IRA Withdrawals

To qualify for a withdrawal from your gold IRA, your assets must stay in the account for a minimum of five years. You also must be at least 59 1/2 years old. If those conditions are met, you can make a withdrawal.

If you do not meet these requirements, and you withdraw funds from your gold IRA anyway, you will incur an early withdrawal penalty of 10% of the value of the assets you withdrew.

This penalty is in addition to any regular taxes that you must pay when you receive the distribution. Other circumstances qualify you to make an early withdrawal from your gold IRA. 

If the assets are considered uncharacterized contributions (e.g. if the gold IRA account was opened before 1997), if funds were distributed because of death or a disability, or if the money was required to cover the down payment of your first home, then the distribution will not incur any early withdrawal penalties.

Required minimum distributions must be made regularly to keep your gold IRA funded. On January 1st of the year, after you reach 71 years of age, you must start to withdraw at least $1,000 annually.

The withdrawal is subject to federal and state income taxes. The withdrawal can be allocated to physical gold coins, ETFs, or stock mutual funds.

Best Alternatives to USAA

Goldco
  • Best Service and Price
  • Large selection of gold and silver coins and bars for IRAs.
  • Easy setting up & rolling over existing IRA.
  • Goldco is Rated A+ on TrustPilot, BBB & Most Trusted
  • Best Gold & Silver Deals in the Industry.
Augusta Precious Metals
  • Best In Education
  • Guaranteed fair pricing on purchases & Money-back guarantee
  • Easy gold IRA setup & Low Gold IRA fees
  • Top reputation & better customer support
  • Totally transparent & Customer know how much they paying for what
Birch Gold Group
  • Lowest Account Minimum
  • Purchase precious metals for a self-direct IRA and for personal investment.
  • Lowest minimum Gold IRA & Free shipping
  • Best customer education and help.
  • Birch Gold Group has established a solid reputation

Conclusion

Gold IRAs are a sound approach to protecting your retirement portfolio from an unstable market. A gold IRA is a reliable investment, and it allows you to access your funds easily.

They allow you to hold actual precious metals in the account which other types of IRAs do not allow you to do.

If you want to open a gold IRA, always select a custodian that has at least ten years of experience and a solid reputation for providing excellent customer service. Request an annual report that documents their past performance.

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 for Our List of the Best Gold IRA Companies to Invest With

Or, if you like what you have read about USAA, you can go to their website below: