I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.
Individual Retirement Accounts (IRAs) are popular retirement accounts for more than 62 million Americans. As the stock market has become more volatile and experts are concerned about a potential downturn, many investors are turning to gold and gold IRAs as safer options.
Scammers exist anywhere there is money to be made, and gold IRAs are no exception. Fortunately, there are ways to avoid gold IRA scams and keep you and your retirement safe.
List of the Most Common Gold Scams
- Home storage gold IRA
- Rare coins
- Collectable/Numismatic coins
- Counterfeit coins
- Non-delivery/Ponzi Schemes
- Pushy salespeople
- Misleading contracts
- Shaved coins
- Bait and switch scam
- Hidden fees
What is a Gold IRA?
Per IRS regulations, you cannot guard your own gold for this type of retirement fund — you will require an IRA custodian. No company can safeguard IRAs for free, so they will charge maintenance fees for sourcing and managing your gold.
However, some companies operate scams where they prey on investors who lack experience with precious metals.
Common Gold IRA Scams
There are numerous investment scams designed to siphon money from unsuspecting investors. While this list covers the most common of these scams, it is by no means exhaustive.
Always consult a financial advisor if you are not sure whether a company is reputable.
Home Storage Gold IRA
Even if a company is merely promoting a “free safe” or “additional coins” you can take home (though not suggesting you take home your entire investment), this should set alarm bells ringing.
Any company offering home storage is intentionally misleading you, and you should avoid them.
Rare coins are not suitable IRA investments. Your gold investments should focus on the spot price of gold when you buy and sell, not on valuables like rare coins.
You should know which kinds of bullion, coins and precious metals are permitted in a precious metals IRA. If a precious metals dealer attempts to sell you coins not approved by the IRS, look for another IRA dealer.
A reputable company will only offer you the opportunity to purchase these types of investments for a precious metals IRA:
- Gold: Except for Gold Eagle coins, all gold for your IRA must be 99.5% pure. A reputable precious metals dealer will know this.
- Silver: Silver coins and bullion must be 99.9% pure to qualify for an IRA.
- Palladium: Palladium must be at least 99.5% pure.
- Platinum: Platinum must be at least 99.5% pure to be eligible.
Additionally, consider it a warning sign if a company is pressuring you to purchase rare coins instead of bullion or common gold coins.
They are likely receiving a commission on rare coin sales, and their interest in you is only for short-term profit.
Gold IRAs allow investors to add gold or other precious metals to their investment portfolios. Any gold or precious metals you invest in should reflect the intrinsic value of the metals themselves, not their collectible value.
Any IRA custodian advertising collectible coins or special edition coins is, at best, purposely misleading you. The IRS does not support collectible coins as legitimate investments for gold IRAs.
Unfortunately, counterfeit coins are relatively common scams. These can be difficult to avoid because counterfeiters coat less-valuable coins and bullion in gold to make them appear legitimate.
If you’re examining the gold you wish to purchase in person, consider using a scale. This is the best way to determine legitimacy.
However, if you do not have the luxury of seeing the gold in advance, you will have to use another method.
If your purchase is going directly to a depository, look at reviews of your IRA company and check Better Business Bureau ratings.
Ponzi Schemes are a type of fraud where a dealer or portfolio manager falsely promises to use funds from future investors to pay back past investors.
In the case of a gold IRA, this might mean you give your money to a company to purchase gold on your behalf. Instead, it will then spend your money on something unrelated or buy gold for another investor it intends to defraud.
The company will only be able to hand over your gold if and when it succeeds in conning another potential investor into joining its scheme.
It can be challenging to determine whether or not you’re dealing with a Ponzi Scheme. The best way to tell is to study the shipping times of your goods.
If shipments are consistently delayed by several months, it is possible the company is not using its funds for the purposes it claims.
Some salespeople may entice you to invest with urgency, warning you that you will miss out on an opportunity if you fail to do so: this is almost always a sign of a scam.
Beware of pushy sales tactics. Know what your personal investment timeline is, and stick to it. These sales tactics are red flags and indicate that the salesperson you’re meeting is too pushy:
- Assurances of quick, high returns: Factoring gold into retirement planning should be a hedge against inflation that provides you with slow, steady returns. Gold is not a huge return investment, and you should be wary of sales pitches that claim it is.
- Pushing for quick decisions: A reputable gold IRA company will understand that retirement decisions should not be made in haste.
- Pressuring for specific coins or collectibles: Gold and precious metals for an IRA are commodities only — that is, their worth is measured according to the metals they are made from, not their demand as collectibles.
Always read a contract thoroughly before signing. This advice is crucial whether you’re opening a precious metals IRA or buying a home.
If you are unsure whether a contract is fair or you are unfamiliar with specific terms, do not sign it. Contact a contract expert for assistance.
While looking at a contract, the salesperson may pressure you to sign immediately. This is an enormous red flag.
The contract should be available long enough for you to sign as and when you feel comfortable, meaning you should have sufficient time to take it home and study it.
One of the most prevalent gold scams is shaved coins. In this scam, dealers shave off miniscule, barely noticeable amounts of gold from each piece of gold they sell.
This scam is difficult to avoid because your gold will likely head straight to a depository after you finalize the purchase — many investors never lay eyes on their gold.
Because of this, you probably won’t have the opportunity to check your investment for indications of manipulation.
Choosing a reputable dealer is the best way to keep you and your investment safe from such scams. You should avoid new companies or companies with poor reviews.
Bait and Switch Scam
Beware of companies that offer free gold or unreasonable bonuses. If it seems too good to be true, it probably is.
Some companies will pull a “bait and switch” and offer you an excellent deal, such as inflated buy-backs or additional bullion coins, only to pull back and charge you later.
If you’re unsure about the legality of a transaction, the reliability of an offer or the legitimacy of a promotion, ask for extra time to consider.
If a salesperson pressures you further and claims that an offer can “only happen today,” do not sign the contract. It is almost certainly a bait and switch.
Any company asking you to invest in precious metals should clearly outline the fee structure to you upfront.
Consider it a notable warning sign if a salesperson mentions different or higher fees mid-conversation.
These are the most common fees for gold IRAs:
- Account opening fee: Most gold IRA companies charge a one-time account opening fee. This fee is sometimes waived for significant initial investments.
- Account management fee: IRA dealers will charge you an account management fee. This fee is usually $100-$300.
- Storage fee: Because you must keep your investment in an IRS-approved depository, you will have to pay a fee to manage your gold safely.
- Spot price fee: In many instances, you may pay slightly above the market price for gold in an IRA investment. This is normal because you’re not buying directly from a precious metals dealer.
However, a company should declare markups at the beginning of your investment process and not introduce them as a surprise further down the line.
If you’re charged additional, large fees aside from those listed above, you may be talking to a scammer.
5 Tips for Avoid Gold IRA Scams
1. Do proper due diligence: You should always check multiple reliable sources to find information about a company. If you see a large number of negative reviews or red flags, choose a different company.
2. Check third-party review sites: A company tends to have testimonials and positive reviews on its website; however, negative reviews are likely filtered out. Check a third-party review site such as Trustpilot to ensure you’re getting a balanced view.
3. Ask to speak with previous customers: Reputable gold IRA companies will have no issue with putting you in contact with happy customers, especially if you’re considering making a large investment.
4. Check the Better Business Bureau: Many gold IRA companies have A+ ratings from the Better Business Bureau. If an option you’re looking at has anything less, you should choose a different custodian.
5. Speak to your financial advisor: Your financial advisor likely has far more experience recognizing and identifying scams than you do. Lean on their expertise, and don’t be afraid to ask their opinion on certain companies.
- If a salesperson is pressuring you to sign or make a purchase faster than you’re comfortable with, this is likely a red flag.
- Avoid companies that promise high returns or claim that gold is a low-risk investment. Gold is a risky investment, and it is possible to lose money.
- Never choose a company that doesn’t offer you time to consult with financial advisors or contract lawyers.
- Choose a reputable company with a large number of positive reviews from third parties who have no vested interest in the its success.
- If you have already fallen victim to a scam, make sure you report it right away to protect other investors.