Because of the uncertainty of the current market, investors are diversifying their mix of investment vehicles. Many have chosen to include gold and other precious metals as part of their portfolio.
Gold IRAs (Individual Retirement Accounts) are a more secure investment option than traditional IRA assets such as stocks, bonds and other paper-based assets. A Gold IRA can offer an investor the peace of mind that comes from having a safe and secure investment.
Gold IRAs are created in the same way as other IRAs and the same rules that apply to regular, paper-backed IRAs also apply to Gold IRAs. The investor may take possession of the precious metal or liquidate the investment for cash. Both of these transactions are considered distributions and are subject to the regular tax rules.
There are various methods available to set up an IRA invested in gold. Many employer-based profit sharing and pension plans can be converted to a Gold IRA. Investors can roll over their conventional IRAs directly into a Gold IRA. Additionally, investors can take possession of IRA assets and reinvest them into a new account. If done this way, the investor must reinvest the assets within 60 days of taking possession. If the current custodian of a conventional IRA is willing to administer the investment or if the IRA is a self-directed IRA, gold can be purchased as an investment for the IRA.
The gold in a Gold IRA must be stored in the custody of the Gold IRA trustee or custodian, and cannot be in the custody of the owner of the IRA. IRA custodians are typically banks, credit unions, mutual fund companies, brokerages and insurance companies. Fees for this service can vary considerably.
What types of IRAs can be Gold IRAs?
A Roth IRA is an individual retirement account that is funded by after-tax contributions. The benefit of a Roth IRA is that no taxes will have to be paid when distributions are made. As long as the requirements are met, taxes will not have to be paid on account earnings. A Roth IRA may be a Gold IRA.
401(k) plans are retirement savings plans set up by an investor’s employer. The defined choices available to employees may not include gold or gold ETFs (Exchange Traded Funds) as an option. Depending on an investor’s specific situation, an IRA Rollover may be the best way to move investment assets into a Gold IRA.
Rollover IRA accounts and rollover 401(k) accounts are frequently utilized by investors that have retired or moved to a different job. However, rollover IRAs are also used by investors to make changes in an IRA account, including changing to a Gold IRA. Rollover IRAs keep the tax-deferred standing of the original IRA and are able to be invested in a number of assets, including stocks, bonds, mutual funds, ETFs and precious metals such as gold and silver.
Direct and Indirect IRA Rollovers
In a direct rollover, the custodian will transfer IRA assets directly into the new Gold IRA. Direct rollovers allow an investor to avoid the 20% withholding requirement. If the rollover is not direct, IRS rules require that 20% of transferred assets must be withheld. A direct rollover can be used whether the same custodian is used or if the custodian is changed.
In an indirect rollover, the investor takes possession of the IRA assets. Rules require that the investor then place the assets into another eligible plan within 60 days. The IRS may withhold 20% of the transferred assets when an indirect transfer takes place. The withheld assets may be released when the investor files an annual tax return.
A self-directed Gold IRA permits investors to make all of the investment decisions, even though IRA assets are still held in an account that is administered by a custodian. Self-directed IRAs give investors the ability to invest IRA assets in accordance with their opinions about a number of factors such as risk, volatility and social issues. Even if an IRA is not self-directed, gold can be purchased through an IRA as long as the IRA custodian will administer the investment.
Whether an investor is looking to diversify an existing portfolio or begin an investment program, a Gold IRA can be an important part of the process. The process of creating a new IRA or converting one is relatively simple. Advice is also available to help an investor move into gold.