Gold is becoming an increasingly popular investment option for those looking to diversify their portfolios, hedge against inflation, or try something new. Gold is a relatively safe investment since it is stood the test of time and has not been known to drop in price at extremes. This makes for a particularly great retirement investment.
If you are interested in investing in gold through your retirement account, specifically your IRA, you can convert IRA to physical gold. This will allow you to invest in gold while also keeping the benefits that come with an IRA plan.
It is important to note that it is more than likely that your current IRA account will not let you invest in physical gold. If you are not interested in opening a new account to invest in gold, then you can always invest in the stock of gold mining companies instead.
If, however, you are interested in a Gold IRA, then here is everything you need to know about doing just that.
Gold IRAs are structured just like normal IRAs
Just like with conventional IRAs, gold IRAs come with rules, regulations, penalties, and potential fees. There are specific tax requirements for Gold IRAs, just as there are with regular IRAs. For example, the IRS is still extremely strict about how much you place into a Gold IRA over the year. They are also pretty strict about what kind of gold is investable in a gold IRA. For starters, you need IRS-approved gold bullion if you wish to invest in gold.
You also can keep your physical gold on hand, just like a regular IRA. With your current IRA, you cannot go in and withdraw whatever you want. If you do, there are tax problems, fees, and potential legal action against you. It is the same for gold IRAs.
The gold that you purchase to invest in your IRA has to be stored in an IRS-approved facility. This is because if you are in physical gold stored in your home, it will count as a withdrawal and the IRS will charge you fees and penalties. You can avoid these fees and penalties by following the rules and regulations for your IRA.
For the tax rules of a gold IRA, click here.
Types of Gold IRAs
Just like with a regular IRA, there are specific kinds of accounts any one person can have. Traditional gold IRAs are one of the most common types of IRA accounts. They allow you to invest in precious metals, paintings, antiques, and collectibles through the account. Just like a regular IRA, the account is tax-free, so you will not have to pay taxes on the gold IRA until after you withdraw the funds for retirement.
There is also a Roth Gold IRA, that you can choose as well. It is similar to the traditional gold IRA because you can invest in various assets like precious metals, paintings, antiques, etc. The main difference between a traditional and Roth gold IRA is that traditional IRAs collect the taxes after the withdrawal, but a Roth IRA collects the post-tax contributions before the account is deposited.
It does not matter which one you choose to invest in, as long as choose one that fits your needs and financial situation.
Opening an Account
To invest in a gold IRA, you first need to find a bank or institution that offers a self-directed IRA for one of their options. Once you have done your research and narrowed down your list of choices to one, then all you have to do is start up the paperwork. It is a fairly easy task anyone can do. Just be sure you are doing your research first before choosing.
Once all the paperwork is in place and you have opened your account, all you have to do is fund it. Now you can do that by adding cash into your account, then you can use the cash to pay for physical gold or other precious metals, but this would mean that you are opening a new account altogether.
If you already have an existing IRA, then you can roll the cash over into your gold IRA by transferring your money or assets. Again, once in the account, all you have to do is purchase gold. I recommend this option for people who do not want to have multiple IRA accounts open at once.
Make sure that the custodian helping you purchase gold helps you find gold bullion that is IRS-approved. There are some types of gold that are not allowed into an IRA account at all. So, avoid wasting money and time by purchasing the correct kind of gold first.
Types of gold and bullion allowed in an IRA
Once you have an IRA opened and funded with money, it is time to purchase your gold. It is worth noting that you don’t have to purchase gold for this kind of IRA. You can purchase silver, platinum, and palladium if you so wish. It is up to you.
Be warned, the IRS has placed specific requirements and limitations on the kind of precious metals you purchase for your account, that way investors are forced to purchase high-quality metals that have long-term value.
Gold must have a rating of at least 99.5% purity before they are allowed into an IRA account. They also must be a specific kind of gold coins such as the American Buffalo or Chinese panda, and bullion bars with a 99.5% purity rating. Failure to adhere to these requirements will mean fees and penalties.
The good news is that your IRA provider will make sure you are not placing any gold or other precious metal into the account that is not allowed by the IRS. If you need help determining which coins or bars can be placed into your new IRA account, then it is time that you ask your IRA provider for assistance. They can probably give you a list of options to choose from so you are not in the dark.