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As a tangible asset that maintains its intrinsic value over time, gold IRA products are a sensible way to provide a hedge against inflation and currency fluctuations. For various reasons, they are a popular and potentially lucrative financial move.
However, as with many popular investment products, they are not without an element of criminal or fraudulent activity, in the minority of cases, at least. In recent times, an increasing number of scams have cropped up, with unfortunate and unwitting investors entrusting their hard-earned retirement nest eggs with fraudulent organizations.
At Gold IRA Blueprint, we find these events deeply troubling and commit a significant amount of our resources to ensure investors are protected from harm. Through this article, we hope to make you acquainted with the common red flags and best practices to help safeguard your investments in precious metals.
Table of Contents
How Do Gold IRA Scams Operate?
Gold IRAs offer investors the opportunity to possess physical gold or other precious metals within a self-administered individual retirement account (SDIRA) intended for retirement. The rather profitable aspect of gold investments has lured scammers and fraudsters aiming to exploit unsuspecting investors.
Unfortunately, there are a few different types of gold IRA scams to be aware of, with the most prevalent including overpayment scams, non-delivery scams, rare coin valuation scams, and home storage gold IRA scams.
As noted, there are several methods employed by scammers to part you from your hard-earned cash, and through this article, we will cover them all.
Notorious Gold IRA Scams
Let’s take a look at the main types of scams that are currently prevalent – and should be avoided at all costs – before later addressing the best practices you can employ to avoid these awful scammers.
Ponzi Scheme Scams
An age-old and very common type of gold IRA scam, this type of fraud occurs when a company lures investors with promises of returns on their investment by combining all investor funds and using a portion to pay dividends to early investors.
This system is, of course, hugely unsustainable in the long run and will eventually fall apart suddenly, and usually in spectacular fashion. The harsh reality is that the money invested ends up lining the pockets of the scammers, providing no tangible value to the investors.
Home Storage Scams
A recently popular scam taking hold among private retail investors involves a phenomenon known as home storage proposals. In this type of scam, companies tempt clients with appealing tax-free offers.
The premise is simple: scammers will persuade investors that they can store precious metals like gold bars at home – within immediate physical reach – promising greater returns from their retirement savings account than traditional avenues if they adhere to appropriate protocols.
The problem here lies in the inherent risk and skepticism that comes with housing physical precious metal assets, which can easily disappear due to theft or natural calamities and theft. But there is a greater danger, and you may have guessed it: the IRS.
The whole idea here is that scammers use the home storage angle as a way to close off the deal to anyone who might be looking to save on taxes. This makes it less of a scam and more of an awful lie – one that poses potential issues with the IRS.
As anyone knows, the IRS is an organization that you really should avoid encountering problems with. So, if anyone tries to sell you gold IRAs with a home storage angle, walk away, frankly.
Counterfeit Scams
Counterfeiting presents another widespread gold IRA scam. A counterfeit coin can be expertly designed to mimic an authentic one. However, buyers will soon realize that it lacks the asserted value.
Therefore, hiring a specialist to verify the authenticity of a particular bullion piece can be advantageous. Taking such a precaution can help investors dodge potential financial portfolio pitfalls.
Collectible Coins
Precious metal IRAs (sanctioned by the IRS) allow you to purchase gold as a commodity, not a collectible. Resist the temptation to buy into sales pitches promoting the acquisition of “rare coins,” as these don’t have any place in a real Gold IRA.
Further to that, unless you possess expert knowledge, there’s a high likelihood that such deceitful salespeople are inflating the price of the items they’re selling: unless you are a pro-level coin enthusiast.
Having said that, we see nothing wrong in the genuine rare coins market. It is both thrilling and dynamic, and we certainly won’t discourage you from diving into it once you’ve adequately educated yourself. However, always bear in mind that Gold and silver IRAs aren’t intended for this function – ignore all sales pitches informing you otherwise.
Coins Shaving
It might seem far-fetched, and it is hard to believe this is even a thing – but there are gold dealers out there who shave off a tiny amount of gold from each coin they sell.
This is a practice that actually dates back hundreds of years, known as ‘clipping.’ The idea is that over time these tiny, imperceptible shavings accumulate, lining the dealer’s pocket and diminishing your investment.
To avoid such unscrupulous tactics, stick to established and reputable GOLD IRA retailers, steering clear of shady backstreet coin dealers looking for a quick profit.
Deceptive Contracts
Though it might seem tedious, thoroughly reading all the fine print before signing any contract, including those for setting up a Gold IRA, is absolutely crucial. You might be under the impression that you’re entering a standard agreement, only to discover later that the contract contains some rather cunning wordplay designed to favor the retailer and not you.
Cold Calling
Be wary if a salesperson unexpectedly reaches out, trying to coax you into a Gold IRA commitment. This kind of tactic is not employed by reputable gold dealers, who typically don’t resort to cold-calling to stir up business. Reputation and trading history alone are usually enough to ensure a reputable gold IRA retailer will have sufficient numbers of customers.
At the risk of sounding overly dramatic, these seemingly harmless salespeople could potentially have malicious intent, such as robbery or worse. While that kind of thing is extremely rare, it can happen and has happened.
A professional and appropriate relationship with a Gold IRA custodian should be maintained at a distance, ensuring your safety and interests.
How to Guard Yourself Against Scams
Being equipped with an understanding of typical gold IRA scams and the red flags to be on guard for is imperative to safeguard yourself and your assets.
By opting for a trustworthy dealer, securing proper storage and insurance – while remaining informed and alert – and you can lessen the chances of becoming a victim of scams, thereby ensuring your savings remain secure.
With that in mind, let’s take a look at how to identify a trustworthy dealer, guarantee appropriate storage and insurance, and remain knowledgeable and alert to safeguard against gold IRA scams.
Identify a Trustworthy Dealer
Identifying a trustworthy gold dealer may sound like an obvious step, but the fact is that some people do not conduct due diligence, which makes this a point worth mentioning.
A good idea is to scrutinize customer responses on verified and credible review platforms, such as the Better Business Bureaux, for example.
Something else that is worth mentioning is that you should maintain an ‘arm’s length’ business relationship with a gold IRA custodian to avert potential theft or deceitful activities.
If a gold sales representative offers to visit your home, we generally do not advise you to grant them access. Through careful identification of a trustworthy dealer and sustaining a professional connection with them, you can reduce scam risks and strengthen the security of your investments.
Finding Adequate Storage and Insurance
Securing appropriate storage and insurance is another aspect of safeguarding your gold IRA investments. The IRS mandates that assets related to gold IRAs must be held in an approved depository or vault.
Possessing IRA assets physically is not in line with IRS rules and could lead to unforeseen liabilities and tax penalties, as covered in the ‘home storage’ warning described earlier.
In short, always stick to IRS-approved storage practices and seek advice from a well-informed legal party if you encounter the slightest of doubts.
Staying Vigilant and Cautious
To shield yourself from the various traps of gold IRA scams, it helps to stay both alert and cautious. Making use of our gold IRA rollover guide will keep you abreast of the latest trends in gold IRA investments and familiarize you with the best strategies, including fraud prevention.
By habitually tracking your investments, spreading your risk across your portfolio, and strictly adhering to assets sanctioned by the IRS, you will build a solid line of defense against scams and increase the security of your portfolio.
Actions to Undertake If a Scam Is Suspected
If you are in the unfortunate position of suspecting you have fallen victim to a gold IRA scam, acting swiftly is your first priority. Through the following segments, we will detail the actions you should take under suspicion of a scam:
Alerting the Authorities
Without stating the obvious too much, should you have suspicions about a gold IRA scam, contact the appropriate bodies without delay, such as The Federal Trade Commission, in addition to your local law enforcement.
By reporting the scam without delay, you’re helping safeguard other investors from the same pitfall and potentially aiding the process of retrieving your funds.
Engaging Legal Help
Cases involving investment fraud can be intricate and demand specialized knowledge and expertise. If a gold IRA scam is suspected, it’s crucial to engage legal help to ensure your rights are safeguarded and to achieve the best possible outcome.
Begin your search by looking up lawyers in your vicinity who focus on investment fraud cases, soliciting recommendations from trusted friends and family, or approaching your local bar association for a list of competent attorneys.
Sound Practices for Gold IRA Investment
Gold IRA investments can offer a promising and secure approach to enriching your savings portfolio. By observing sound practices, you can greatly minimize the risks linked with gold IRA scams and secure the safety of your investments.
Broadening Your Investment Array
By spreading investments across a variety of assets like gold mining firms, exchange-traded funds (backed by actual gold), or purchasing gold coins or bullion, you can shield your investments from market turbulence and manage a well-proportioned portfolio.
IRS-Certified Assets
In the context of allocating investments in precious metal IRAs, you should obviously stick to assets that have been certified by the IRS. The IRS provides clear guidelines on the coins and bars that are acceptable for investment via a gold IRA account, including gold, silver, platinum, and palladium bullion – they are very much worth reading, and we recommend you do.
Check Your Investments
While it might be tempting to leave your investments ‘ticking over’ unsupervised, consistently supervising your investments will ensure they are performing as planned and stay in line with your general financial objectives.
By opting for a trustworthy gold IRA company and making wise choices, you really will greatly reduce your chances of being scammed. Remember, victims are in the vast minority here – and those who have fallen to gold IRA scams may not have taken appropriate steps to reduce the chances of being scammed.
Our intention here isn’t to cause alarm but rather to inform and help shield you from potential issues. Again, we must stress victims of gold IRA scams are in the vast minority, so please do not be overly cautious.
The majority of dealers and retailers are trustworthy and reputable, and we want you to enjoy your investment portfolio without spending too much time worrying about fraudulent activity.
FAQs
Are Gold IRAs Genuine?
Gold IRAs are a valid precious metals investment option that has become very popular in recent years. They offer retirement portfolio diversity, potential for tax-deferred growth, and typically lower fees than traditional or Roth IRAs.
What Are Gold IRA Downsides?
Gold IRA’s returns might be lower than other investments, there are contribution limits, and fees are also involved. That said, the purpose of investing is less about fast profits and more about protecting against inflation and diversification.
How Do I Exit a Gold IRA?
To exit a gold IRA without penalty, you should be at least 59 years and 6 months old. After reaching this age, you can withdraw and either keep your gold investments or liquidate them for cash. Early withdrawal attracts a 10% penalty.
Article Sources
At Gold IRA Blueprint, we dive deep into the world of gold IRAs, using trusted sources to back up our insights. Our sources range from official documents to expert interviews, ensuring our content is both accurate and reliable. We also draw on research from reputable publishers to give you the most comprehensive understanding possible. Check out our editorial policy to see how we maintain our high standards for accuracy and fairness. Also make sure to check out our Financial Review Process to have a better understanding of our process.
https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/fraudadv_preciousmetals.html
https://incomeinsider.org/gold-ira-scams/
https://www.sec.gov/investor/alerts/sdira
