Gyroscopic Investing

I have a "problem" in that most of my assets are within the umbrella of IRAs or 401ks. Almost none of my money is in regular taxable accounts. Without going into too many details of my life and business, let's keep it simple and say that going forward, I expect to not have much "cash" left over outside of Solo 401k, IRA, and HSA contributions, and home ownership. I simply don't make enough money to max out all of the accounts, pay debt, and still save money on the side in regular taxable accounts, and I don't foresee that happening anytime soon. I live a very tax efficient lifestyle and maxing out these accounts really helps cut back in taxes.

This means I can't hold 25% of my portfolio in physical gold coins in my possession because nowhere near 25% of my portfolio is external to IRA-type accounts. I've read all the threads on this forum and other forums on GLD, PHYS, IAU, SGOL, and GTU and I'm very unimpressed.

A long time ago I researched self-directed IRAs and determined the fees were too high given what I wanted to do with it. However, now that my portfolio is pretty well established, I can reduce the expenses by cutting the need for the "new purchase fee." I don't need to "buy" new gold coins in the self-directed IRA on a regular basis. I'd be happy putting 50% of my gold holdings (12.5% of my total portfolio) into a self-directed IRA, because about 15% of my holdings are in regular taxable physical gold coins stored in my basement safe, so that means only 35% would be left in the suboptimal counterparty-risked-fulled ETFs/ETNs.

I can deal with 1/3 of my gold being in those paper assets, and it's actually a good thing because that makes it easier to rebalance if gold skyrockets.

Since I do have new money coming in that is taxable non-IRA money (albeit in small doses relative to new IRA/401k money), I can direct all of my future savings to gold coins, and realistically, I shouldn't have to buy any more coins in the Self-Directed IRA on a basis more often than once every 2 to 3 years.

One company I looked at, the fees were under $300/year for $100k of gold. That's a 0.3% ER which seems very reasonable compared to ETF/ETN expenses. Where they "get you" is the $50 per transaction fee, but if that's only every few years, it's negligible.

It's my understanding with these IRAs, you can take the distribution in the form of the actual coins you bought. So if it's a Roth IRA, that means I can take possession of the coin, and the "cost basis" of that coin is whatever the gold coin value was on the day of the distribution, so when I eventually sell it, the taxes owed would only be the difference between market price and the final IRA cost basis.

Or, perhaps eventually, I do wind up building a sizable taxable investment allocation, in which case I liquidate the gold coins, transfer the money back to my Roth IRA brokerage account, buy stocks/bonds with it, and then use my taxable money to buy gold coins that I physically possess, as the PP is meant to do.

My biggest concern with these self-directed IRAs is what happens if:

The custodian goes out of business? How much is this going to cost me to transfer custodians due to the paperwork costs associated with that and the fact that my "man parts are in a vice" by the future custodian because IRS won't let me take possession of the coins so I'll be forced to pay whatever another custodian wants to take over the paperwork, and there's not many businesses in this marketplace, competition is limited, and they could charge a lot.

Also, what happens if someone at the custodian commits fraud and directs the vault to send the gold coins to his drug dealer or something? The storage fees include insurance of the gold being stolen from the vault. If the IRA custodian goes rogue and steals my stuff, there's no insurance for that. And given that these businesses serving as custodians are small, it seems risk of fraud is very high and I may not find out for years if they continue to send me forged documentation every quarter in my statements.

It seems to me that the risk of fraud from the custodian is greater than the risk of ETF/ETN collapse, which is why I am leaning against the self-directed IRA option. However, it does intrigue me and I am interested in exploring it.

This isn't directly answering your question, but are you sure that it is a good idea to put almost everything in tax-deferred accounts? Have you done any forecasting to see where this will leave you tax-wise when you start to withdraw from those accounts?

Libertarian666 wrote: This isn't directly answering your question, but are you sure that it is a good idea to put almost everything in tax-deferred accounts? Have you done any forecasting to see where this will leave you tax-wise when you start to withdraw from those accounts?

I've run the numbers and it's a huge benefit. I'm paying California state income taxes now and will not be in retirement. So there's 10% immediately saved.

coinstar wrote:

Libertarian666 wrote: This isn't directly answering your question, but are you sure that it is a good idea to put almost everything in tax-deferred accounts? Have you done any forecasting to see where this will leave you tax-wise when you start to withdraw from those accounts?

I've run the numbers and it's a huge benefit. I'm paying California state income taxes now and will not be in retirement. So there's 10% immediately saved.

Ah, I see. Have you run the numbers on moving to a less ravenous state? :-)

Libertarian666 wrote:

coinstar wrote:

Libertarian666 wrote: This isn't directly answering your question, but are you sure that it is a good idea to put almost everything in tax-deferred accounts? Have you done any forecasting to see where this will leave you tax-wise when you start to withdraw from those accounts?

I've run the numbers and it's a huge benefit. I'm paying California state income taxes now and will not be in retirement. So there's 10% immediately saved.

Ah, I see. Have you run the numbers on moving to a less ravenous state? :-)

Yes, absolutely. Leaving in a few years for retirement.

I don't like self-directed IRA's because of the outrageous fees trustees charge.  And I've looked at them several times over the years.  They are anarchronistic, bureaucratic, paper pushing operations and I have zero confidence they will withstand any IRS scrutiny, hackers or a crisis.  At least one has already run into legal trouble in the years past.  There's also lax regulation over them.

I suggest a better solution is a gold coin accumulation plan outside your IRA.  It's like layaway and then when you have enough accumulated, you can purchase a coin and have it stored or delivered.

As a side note, I believe "tax protestor" Terry Coxon who was HB's partner back in the day when they devised the prequel PP (PRPFX) shills for one of these self-directed IRA companies, or maybe it was an offshore trust managenent company or even both!

i had one of these for a while, and i am also not a fan.. the fees were huge and the time it took to get the gold sold and receive the money was terrifying (a month+). and then there are to many people between you and your money, unless they have dramatically changed the nature of how these funds work since i had one, i would definitely call them incompatible with the PP philosophy...