Gold IRAs can be a helpful tool if you’re looking to diversify your retirement plan. But like with any investment, you have to keep your radar up for scams.
These scam dealers might steal your money entirely. They also might trick you into buying marked-up goods or lie about offering gold IRA services at all, making you think you’re opening a tax-advantaged account when you really aren’t.
Falling for a scam isn’t just embarrassing; it also means you could lose your much-needed retirement money, forcing you to live on less or even stay in the workforce longer than you originally planned.
Legitimate gold IRA companies, such as Thor Metals Group, won’t contact you first, pressure you into buying quickly, or hide their fees from you. Here are a few signs that the gold IRA dealer you’re talking to may not have your best interests in mind.
1. The dealer reaches out to you first
The Commodity Futures Trading Commission, a federal agency that oversees derivatives markets, including precious metals, recommends that you don’t respond to dealers who call or email you first. The commission says junk mail, infomercials, and social media posts are common tactics used by scammers.
Those companies may hope you’ll make the convenient choice without checking deeper into the business, which could be poorly reviewed or have multiple complaints lodged against it. Instead, do research into whatever dealer you’re interested in working with. Look for a company’s online reviews to see if people have bad experiences with the company; if people are saying they aren’t getting the goods they pay for, don’t work with that dealer.
2. The company has a lot of complaints or poor reviews
Once you’ve started researching the dealers you’re interested in, you can check with the Better Business Bureau to see if they receive a lot of complaints from their customers. If they’ve received thousands of complaints, haven’t addressed those complaints, have a low BBB score, or have reported government action taken against them, those are red flags.
Depending on what state you live in, you might also be able to check with your state attorney general’s office to see if the dealers have received any complaints there.
Generally, precious metal dealers don’t need a federal license to operate. But if the person you’re talking to is offering investment advice, such as telling you how much or what type of gold to buy, they may need to be registered. The CFTC says to check with either federal agencies, like the SEC or FINRA, or your state’s securities regulators to make sure the dealer you’re talking to is legit.
The SEC and FINRA both offer online databases of all the advisors and brokers registered with them, but you might have to call or email your state regulators to get more information.
3. The dealer uses time-sensitive or high-pressure sales techniques
If the dealer you’re talking to is pressuring you to buy immediately, you should probably do the opposite. This could take the form of offering you a free gift if you purchase within the next day. It could also look like your dealer saying that the economy is just about to crash, and the only way you can protect your retirement money is to put it all in gold.
4. The dealer wants you to keep all your retirement savings in gold
Gold is sometimes seen as a “safe haven” because it tends to hold value, even if inflation is rising quickly. But precious metals can still be a volatile market, and they don’t follow the same patterns as the stock market. Gold is useful as a diversification tool, but it’s a bad idea to put all your retirement money into a gold IRA.
If a dealer is trying to convince you to transfer all of your retirement funds into a gold IRA, especially if they’re saying you need to do so quickly, that dealer doesn’t have your best interests in mind. It’s better to go with another company entirely.
5. The company makes your investments feel emotional
Even if they aren’t pushing you to buy quickly, stay away from dealers that use overly inflammatory messaging (especially political messaging) to get you to buy. Some dealers will even falsely claim to be endorsed by major celebrities or political figures to make you trust them.
These dealers are hoping you’ll make an emotional decision instead of a logical one; that’s not a good sign for your finances.
6. You find hidden fees or significant markups
Gold IRAs can come with a lot of extra fees. With a legitimate dealer, you generally need to pay a startup fee, meet minimum investment quotas, get insurance, and pay for a third party to store it. Since you buy the gold for a little over market value, you could lose money when you sell it if the price of gold hasn’t gone up since your purchase.
If the dealer you’re interested in avoids being upfront about the fees, that’s a red flag. It could mean that their fees are higher than industry averages — leaving you with more costs than you’re comfortable with once it’s too late to back out. To find out industry averages, talk with several dealers about the fees they charge. If one dealer’s fees stand out as much higher than the rest, or if a dealer refuses to tell you the fees they charge, don’t go with that dealer.
Another way dealers might try to take advantage of new customers is by marking their gold up significantly past market value. Always check with a third-party site, such as APMEX, goldprice.org, or Kitco, before buying gold. Dealers will generally charge you a small markup from market value, but it shouldn’t be 15% or 20% above market.
7. The dealer tries to sell you collectible coins
Collectibles may not have intrinsic value the same way gold bullion does; they don’t have the same value as a safe haven, and it’s harder to tell if they’ve been marked up by the company selling them. Plus, the CFTC says only certain types are allowed to be stored in a gold IRA.
If the dealer you’re talking to does any of these things, that’s a sign to start looking into other options. Gold IRAs are expensive — it’s better to be safe than sorry.
Created by the Commerce team at Business Insider with Thor Metals Group.