Get The Benefits Of Holding Physical Assets Through A Rollover Into Your Retirement Account.
The Page Contains Important Gold IRA Rules And Tips That Can Help You Protect Your Wealth in Times Of Economic Upheaval
Bookmark this page if you’ve ever wondered: What is a gold and silver IRA? We explain it all in definitive detail below.
Read on, this guide is meant especially for you and will cover the basics of what you need to learn about holding precious metals in your own IRA account for your retirement savings.
Investing in precious metals such as physical gold, silver, and platinum and palladium is one of the best investment decisions you can make for your later years, especially during periods of economic uncertainty. Stocks and bonds are two of the riskiest investments as they are subjected to fluctuations due to inflation, wars, natural disasters, and several other conditions. Securing your future through a Gold Individual Retirement Account (IRA) allows you to harness the benefits of an IRA investment and the benefits investing in precious metals.
Traditional IRA accounts may not provide the financial security you require for yourself and your loved ones. Locking down all your assets in an IRA or 401(k) account exposes you to the risk of losing your assets due to inflation and devaluation.
This guide will help the beginners who want to secure their retirement savings investment in this manner.
Why Should I Consider A Gold IRA Rollover?
Since the dawn of time, silver, platinum, and gold have been considered valuable. Thousands of years have passed but the human fascination with precious metals remains as strong as ever. Even today, these valuables have their place in an intelligent investor’s portfolio because they are undeniably considered as a universal symbol of wealth and prosperity.
But in today’s uncertain economic conditions, there are several good reasons for investing in these valuable commodities to balance your retirement portfolio.
Precious Metals Investment Techniques, Such As A Physical Gold IRA Can Provide a Safe-Haven in Times of Political Uncertainty
Precious metals serve the purpose of ‘wealth insurance’ in times of wars, political upheavals, and natural disasters. With the increasing terrorists’ attacks, natural disasters, and geopolitical tensions (think Ukraine, Syria, Iran, China, etc.), it is important to keep your retirement portfolio financially secured by investing in precious metals.
In The Right Environment, Precious Metals Have Profit Potential
Risk and profit go hand in hand, but precious metals are unlike any other high-yielding investment because of their profit potential and risk-free nature. The prices of precious metals continue to appreciate over the long haul because of increasing demand and diminishing stores. It is expected that by 2030, gold prices will almost be doubled.
Precious Metals Through A Gold IRA Provide a Hedge Against Inflation and Deflation
The US dollar and other currencies have fallen precipitously relative to precious metals over the last few years. In case of a stock market crash or financial instability, gold serves as a ‘crises commodity’ and remains unaffected by inflation or deflation. Metals such as gold and silver not only retain their intrinsic value in good and bad times, they also increase your purchasing power considerably.
Introduction To The Individual Retirement Account
A Gold IRA is an IRS-approved depository of precious metals. It functions in the same way as a regular IRA, except that it holds physical coins or bars of precious metals instead of paper assets. They allow the individual to secure their assets in a tax-deferred account that holds relatively smaller risk as compared to the traditional IRAs.
There are three main reasons why investment in physical gold bars or gold bullion can be a good idea to augment your retirement savings.
- Investment Portfolio Diversification
- Hedge Against Inflation and Deflation
- Profit Opportunity
IRS-Allowed Precious Metals
The list of precious metals allowed for a self-directed IRA is pretty short, namely: gold, silver, and platinum and palladium.
Purchasing IRS-approved gold coins and gold bullion is the first step of IRA investing. You should ensure that you meet their asset meets the fitness requirements set by the Internal Revenue Service (IRS).
The regulations pertaining to investing in precious metals can be found in Cornell University re: Section 408(m)(3) of the IRS code. Failure to meet the requirements set by the IRS may subject the investment to certain taxes.
- Gold must be .9950 (24 karats) pure.
- Bullion bars should be fabricated by NYMEX, COMEX, or any other ISO 9000 approved refiner.
- Proof coins should be presented with a certificate of authenticity and must be in their original mint packaging.
- All bullion must be in an uncirculated, first-rate condition.
The following coins are acceptable to be held in a IRA by the IRS:
- American Gold Eagle bullion coins
- American Gold Buffalo uncirculated coins
- American Gold Eagle proof coins
- Chinese Gold Panda coins
- Canadian Gold Maple Leaf coins
- Australian Kangaroo/Nugget coins
- Austrian Gold Philharmonic coins
You can invest in the above mentioned coins in specific sizes.
One ounce, one half, one quarter, and one tenth ounce coins are allowed by the Internal Revenue Service.
Although we are focusing on gold here, the fitness standards for silver, platinum and palladium are as follows:
- Silver .999%
- Platinum .9995%
- Palladium .9995%
What Kind of Account is Needed to Invest?
To invest in physical gold, an individual is required to setup a self-directed IRA. With a self-directed IRA, the investment possibilities are unlimited. The account holder directs all the investment decisions and enjoys great flexibility in choosing the investment opportunities.
The retirement plan is opened with a custodian that allows the owner to invest in precious metals and other traditional assets such as real estate, notes, tax lien certificates, etc.
Working With a Self-Directed Custodian
Physical gold such as bars and coins can be purchased through a self-directed account through the process of a gold IRA rollover. Because of complex rules and regulations, the IRS has mandated it to get services of a custodian to hold and manage gold iras. A custodian is a company responsible for the management and security of your assets.
A self-directed custodian can be a bank, credit union, brokerage firm, or savings and loan association that has been approved by the IRS.
If you have answered a resounding “yes” to the question: “why invest in gold“, and if you already hold an IRA, you will be required to ask your existing custodian about whether they offer you the flexibility to invest in physical metals using a gold ira rollover method. If not, you will be required to setup a new IRA and transfer your funds to the new retirement account.
Do You Need a Custodian to Handle Your Self-Directed Account?
A simple answer to this question is YES because the IRS has mandated it to open a self-directed account with an approved custodian.
What to Look for In a Custodian
You may look for the following factors to make the best possible decision.
- Licensure – Only IRS-approved self-directed custodians are allowed to hold and administer physical gold iras.
- Specialization – Specialization is usually an indicative of expertise and quality of services.
- Fees – The fee you are charged by a custodian can impact the total returns of your gold iras.
How to Transfer Your Funds into a Self-Directed Account
The next step of the process is to transfer your funds to an IRA. Individuals, who already hold an IRA, can easily invest through a gold ira rollover process or direct transfer. Meaning, if you hold any other retirement plan such as 401(k), 457(b), 403(b), or a Thrift Savings Plan (TSF), you can easily convert them through a rollover process.
Knowing the Difference Between Direct Transfer and a Rollover For Your Gold Retirement Savings Account
As discussed, an individual can invest in precious metals through direct transfer or gold ira rollover, depending on the type of account they hold. However, there are some differences between the two processes in terms of taxes charged and others rules and regulations.
Direct transfer of an IRA is a tax-free process in which you simply move your IRA from one custodian to another. Since it is a tax-free process, you will not be required to report anything on your income tax return and you are permitted to perform as many transfers as you like.
The gold IRA rollover process allows you to transfer whole or some part of your retirement funds into another qualified retirement plan such as gold iras. Whether you hold a 401(k) retirement plan or a traditional or Roth IRA, you can easily transfer them into a suitable retirement account. There are no tax penalties whatsoever, provided you complete the process in 60 days. The process can be repeated once in every 12 months.
Tax Implications Of An Investment
One of the most important considerations for investing is to understand its tax implications.
The major tax benefit of a precious metals IRA is that you are not required to pay tax on the gain in value of your assets when they are sold. You are only required to pay tax on withdrawal of the money generated from the sale of the gold and silver. Generally speaking, Roth IRA accounts particularly offer more tax benefits as compared to other types of IRAs.
Tax Implications Of Withdrawal At Retirement From Your Gold IRA
When you withdraw your funds by selling gold and silver upon reaching the retirement plan age, you are not required to pay the normal collectible capital gain tax rate.
If you hold a Roth IRA that was opened five or more years back, you will not be required to pay any kind of tax on withdrawal at or after your retirement plan date. If you hold a traditional IRA, you will be required to pay tax on the withdrawn amount equivalent to the normal income tax rates.
Storage Options – Where are the assets are stored?
It’s very important to find a trusted custodian who can store your assets in a safe depository of your choice. Look for a custodian who offers a broad range of storage options.
Many custodians store their investors’ assets in private depositories, which have highly advanced security mechanisms and tools such as timed locks, 24 hours monitoring system, automatic relocking, and vibration, motion, and sound detectors.
According to the IRS, gold and other precious metals should remain in the custody of an IRS-approved custodian until the funds are withdrawn on reaching the predefined age. There are two types of storage depositories – a segregated depository and a non-segregated depository.
In a segregated or allocated depository, your coins and/or bullion are kept separately from other people’s assets. This type of storage option is available for gold bars of 10 ounce and greater. When you decide to withdraw your retirement funds, you will receive the same bars that you had originally deposited. In a segregated depository, gold bars are identified by their serial number, refinery name, and size.
In case of a non-segregated or unallocated depository, your gold will be mixed with the assets of others. However, you will receive the coin or bar of the same year that you had originally deposited. In an unallocated depository, bars are identified by their weight and refinery, and coins are identified by the type and year minted.
Rules for Withdrawing Your Assets from Your Individual Retirement Account
Just like other retirement plans, there are certain rules for withdrawing gold from gold iras. The rules and regulations are different on physical withdrawal of gold and on withdrawal of cash by liquidating the assets.
Cash Withdrawal by Liquidating A Gold IRA Or Silver IRA
An IRA custodian can liquidize the assets on receiving a distribution request by the investor. They are liquidated and cash is issued to the investor who is required to pay taxes at a predefined rate on the distribution of their account assets.
Physical Withdrawal From Your Gold Retirement Savings Account
Gold stored in an IRA is the property of an investor, and they can request the custodian for a physical receipt whenever they like. However, one must consider that they will be required to pay tax twice, first on the distribution of their IRA and second when they liquidize their gold to cash.
Purchasing With a Self Directed Account
To purchase bars and coins for investment in a self-directed IRA, you should first contribute some funds to your account.
This can be done by directly transferring the fund or by rolling over your existing retirement plan to your new gold iras. With funds in your account, you can request the custodian to use your funds for purchasing from the selected dealer. The custodian buys gold on your behalf and delivers it to an approved segregated or non-segregated depository of your choice.
The 4-Step Process of Investing
The following 4-step process explains the procedure to invest in a Gold IRA or Silver IRA, from opening a self-directed account to buying gold from a dealer.
Open Your Self-Directed Account
The process of opening such an account involves nothing more complicated than completing an application. The new account is opened within two business days of receiving the application (sometimes faster with certain companies), depending on the custodian policies and procedures.
Fund Your Account
Once you have opened your new account, you can fund it in three ways:
- Through direct transfer
- Through a gold ira rollover
- Through contribution
The process is quite simple and quick if you are funding your new IRA by directly transferring the money through a wire transfer. If you are transferring your funds by a rollover, such as a 401k to gold ira rollover, or a direct transfer, you will be required to consult with your custodian to ensure that you complete all the necessary steps involved.
That process may take several days to weeks.
Select a Storage Depository
Before purchasing from an approved dealer, the account holder must select a depository where their assets will be stored. Every custodian usually has a list of their affiliated storage depositories. Remember, you can always move their funds to another custodian if they do not offer storage options of their choice.
Purchase from an Approved Dealer
Once you have transferred your funds into your new account, you can invest in gold bullion and coins from a reliable and IRS-approved dealer. This is a multi-step process and requires expert investment advice from an authentic IRS-approved consultant.
- Once you have selected a dealer and funded your account, you can buy gold from your selected dealer by placing an order.
- Dealer then contacts your custodian to verify the availability of funds in your account.
- Custodian contacts you to verify the order.
- Custodian then contacts the dealer and confirms the availability of funds and authenticity of the order.
- Dealer delivers the gold to your selected storage depository and funds are released to the dealer once the depository confirms the receipt of gold.
On completion of these five steps, gold is attributed to your self directed account in a depository for safekeeping and you are ready to enjoy the benefits of investing in precious metals.
Cost of Investing in a Gold IRA Rollover
The fee structure of maintaining a retirement savings account such as 401(k) and traditional IRAs is often very complicated. Because of this reason, many people think twice before investing. As a matter fact, the cost of opening and maintaining an IRA is minimal compared to the profit it offers, and the process is quite simple.
Investment involves different parties, including the custodian, a storage depository, and the dealer. These three parties charge some amount to the investor for their services.
Typical Fees of Opening an Gold IRA or Silver IRA Account
Because this process is a tax-deferred account, therefore, it must be opened with an IRS-approved custodian. The fees varies from custodian to custodian, but expect to pay around $50 when opening gold iras or rolling over your existing retirement plan funds to the new account.
Fees of Conducting a Gold Transaction
Once you have opened an account, you are ready to invest in coins and gold bullion. However, you will be required to pay a transaction fee every time you purchase or sell any of the assets. Again, the fee varies from custodian to custodian. $40 per transaction is a typical charge to conduct such a transaction.
Fees for Maintaining an Account
Custodians are responsible to protect your investment and take care of all the bookkeeping and account maintenance tasks. They charge you some amount on yearly basis, which may range from $75 to a few hundred bucks.
Fees for Gold Funds Transfer
Whenever you buy from an authentic dealer using your IRA, your custodian is required to transfer the amount charged to the dealer through wire transfer. Each wire transfer may cost you around $25, but you can reduce this amount considerably by conducting fewer but bigger transactions.
Fees for Storage of Gold
The gold you purchase from a dealer is kept in a storage depository that is responsible to keep it secured and segregated from other people’s assets. Expect to pay around 0.5 to 1 percent of the value of your assets to the storage depository every year. In addition to the value of gold, the fee charged by a storage depository also depends on its type and other features that it offers. A segregated depository is likely to charge you more as compared to a non-segregated depository.
Your portfolio of precious metal assets also impacts the amount you are charged by a storage depository. If your account holds different types of precious metals, you are likely to be charged a higher amount by the storage depository.
The Principal Cost of Precious Metals
Whenever you buy coins, gold bullion and other precious metals from a dealer, you may be charged an extra fee by the dealer that is known as the spot price or dealer’s premium. It is based on various factors such as product type, dealer premium, and demand of the product.
Dealer premium amount varies from dealer to dealer and their ability to buy mints directly from the government or private mint producers. Generally speaking, dealers charge an extra amount to cover the cost spent on insurance, shipping, marketing, storage, labor, and other services.
Information on this page is intended for entertainment purposes only. Iragoldadvisor.com and its editors recommend you seek professional investment advice before undertaking any financial transaction.