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So you want to buy gold in an IRA? In today's volatile market, investors are gravitating towards precious metals to protect their portfolios.
A gold IRA, also known as a precious metals IRA, is an individual retirement account that enables investors to have physical gold or other approved precious metals held in custody.
Before we get started, investing your savings is a serious task. When it comes to adding precious metals to your portfolio, how do you know which companies to trust?
That is why we have researched every company in the industry and selected the very few with the highest customer service standards.
This way you can easily compare the best companies in the business, and choose one that fits your needs and investment goals.
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Owning a gold IRA comes with many benefits. For instance, a gold IRA has many advantages similar to investing in gold itself. Gold is commonly used as a hedge against inflation.
This allows investors to feel more certain about their portfolio even during uncertain times. Moreover, the price of gold can never fall to zero compared to stocks and bonds that can.
Investors also prefer the tax advantages that come with a gold IRA. Gold IRAs have similar advantages to traditional IRAs. With that said, investors can expect interest to accumulate tax-free until it's time for retirement. But if you choose to withdraw your funds before age 59 and a half, you will face penalties.
While the benefits are clear, investors who are new to the precious metals industry don't know how to buy gold in an IRA. There are several steps that you'll need to follow before you can do so.
This includes finding a gold IRA custodian, opening a gold IRA account, adding funds, and selecting metals. If this sounds overwhelming, don't worry. We're going to walk you through it step-by-step.
1. Find a Gold IRA Custodian
All investors interested in opening a gold IRA must have an IRS-approved custodian. Custodians are put in place to avoid conflict with tax regulations on self-dealing, self-directed IRAs.
Custodians are financial firms tasked with executing investment activities and administrative duties needed to keep your IRA in good standing with the IRS. This is essential to keeping your account in tax-deferred status.
If you work with a gold IRA company, you'll find that many of them have preferred custodians that they'll recommend or require their customers to use. But you can also do your own research by visiting the RITA website.
2. Open Your Gold IRA Account
Once you've identified your custodian, you'll need to open your gold IRA account. While this process may seem overwhelming, many gold IRA companies offer a streamlined process to help you get your account started.
Some companies sell precious metals and also offer IRA services. Not all precious metals companies have IRA services though. But many of them offer educational resources or may have a company they've partnered with to direct you to.
Keep in mind that gold IRA companies do not offer IRA investment advice, even if marketing materials suggest it. With that said, it's important to do your own research to help you decide which company is best for your needs.
A good IRA company should offer an expansive investment selection. Additionally, the company should have commission-free and/or low-fee trading. Another sign of a good IRA company is one that offers additional features like retirement planning resources, educational tools on precious metals, and customer support.
3. Add Funds to Your Account
Next, you'll need to add funds to your gold IRA. Luckily, there are numerous ways you can go about it. Let's take a look at some of the ways you can fund your gold IRA:
401k to Gold IRA Rollover
One of the most common ways to fund your gold IRA is by rolling over your assets from an existing IRA, 401(k), 403(b), 457(b), or Thrift Savings Plan. The process is commonly referred to as a 401k to gold IRA rollover. If you would like to roll over your current retirement plan, all you need to do is contact the administrator of your current retirement plan and tell them how much you would like to roll over.
Important Note: Investors younger than 59 and a half who choose to roll over their assets to fund their gold IRA have a maximum of 60 days to withdraw the funds and successfully transfer them to a new account. It's crucial to adhere to this rule as even being one day late will trigger a 10% early withdrawal penalty that will lead to you paying income tax on the withdrawn funds.
If you're someone who wants to avoid the idea of a penalty, your best option is to choose the transfer method. With this method, you let the gold IRA company coordinate the rollover through a direct institution-to-institution transfer.
In this scenario, you never touch the money. This means you don't have to worry about taxes or penalties being assessed and can provide you with additional peace of mind.
One last option is to fund your gold IRA account with cash. This is not the most ideal option because you will have already paid taxes on the money which defeats the purpose.
One of the goals of an IRA is to capture the tax advantage that you'll receive when using pre-tax dollars. Nonetheless, cash is still an option if you would like to consider it for funding.
4. Understand IRA-Approved Gold
Not every precious metal is approved for your gold IRA. It's important to understand what gold can be included to save time and offer you a more seamless investment experience.
With that said, investors can hold gold, silver, platinum, and palladium coins or bullion in a precious metals IRA. But these items need to be IRS-approved. According to the IRS, there are minimum requirements for metal fineness and specifications about the type, size, and weight of metals. Here are the details below:
IRS-approved gold must be 99.5% pure. Silver must be 99.9% pure. Platinum and palladium metals must be 99.95% pure each.
Moreover, your precious metals must be certified or accredited by a national government mint or from one of the following precious metals authorities: NYMEX, COMEX, NYSE/Liffe, LME, LBMA, LPPM, TOCOM, or ISO 9000.
Many precious metal dealers will have a category for IRS-approved coins. But you can also do your research. With that said, American Eagle proof coins and bullion and Canadian Maple Leaf coins are the two most commonly used types of IRA-approved gold bars and coins.
5. Add Gold to Your IRA Account
Once you have a good grasp of IRA-approved gold, it's time to select your metals. You'll find that there is a great variety of metals that are approved for your IRA. To make your selections, you will coordinate with your chosen precious metals dealer who will work with the custodian to complete your transaction.
Things to Keep in Mind
There are a few things to keep in mind when opening a gold IRA. Let's explore some of the things that you'll need to consider:
Gold IRA Fees
IRA fees are something you should always think about when opening a gold IRA. Unfortunately, most gold IRA companies aren't as transparent as they should be about their fee structure.
In many cases, investors must scan several web pages to find information about fees. But some companies have been known to not include their fees at all.
To learn more about this read our article on gold IRA fees.
The reality is that many people will have to call to find out details about fees. But to help you be more prepared, we're going to share common fees that you can expect:
Account setup: A one-time fee is charged to set up your new gold IRA account. Fees will depend on your chosen financial institution. However, fees can range from $50-$150 give or take.
Markup Fees: What you pay for gold will vary depending on what you purchase. In addition to paying for your gold, you will also be charged a markup fee, meaning you'll pay more than the market value.
Storage Fees: All gold purchased for your gold IRA will need to be stored in an IRS-approved facility. With that said, there is a charge to use the storage facility.
Insurance: You will also incur insurance fees to protect your metals. Insurance fees can run between $100 to $300 a year.
Selling Fees: Once you decide to sell your gold to a third-party dealer, the dealer will typically offer you less than the current market value. This means that you are likely to lose a small portion of your investment unless the price of gold has significantly increased.
Age and Restriction Limits
We've briefly talked about penalties associated with withdrawing your funds early. But let's dive a little deeper into the age and retirement limitations associated with your gold IRA:
Gold IRAs are a type of self-directed IRA. Self-directed IRAs have certain limits on contributions and distributions based on your age, similar to a traditional IRA. As of 2023, the maximum contribution limit is $6,000 per year for individuals under the age of 50 and $7,000 for individuals 50 and older.
Gold IRA Withdrawal
Individuals who are at least 72 years are required to take distributions from their gold IRA. There are two options for withdrawal: in-kind distribution and liquidating your gold.
In-Kind distribution: This type of distribution means your gold is shipped to you. When choosing this option, you must pay for shipping and insurance.
Liquidation: The second option is to liquidate your gold. With this option, the gold IRA company will liquidate your metals and send you the funds. Some companies will even buy back gold. However, the price at which they purchase gold will be lower than the price they sell it.
Gold IRA FAQs
Before buying gold in an IRA, read on for some FAQs:
Why are gold IRA fees higher than a traditional IRA?
Many companies like JP Morgan and Merill Lynch charge nominal fees or no direct fees because they are structured to make money off the investment products they sell.
A self-directed IRA custodian doesn't make money off any assets you own through their IRA. For this reason, the custodian must charge a fee for them to stay in business and ultimately be able to provide adequate custodial services. Additionally, these fees are necessary to secure storage for the account holder.
Do I need to invest all the money in my gold IRA at once?
It is not a requirement to invest all of your money at once unless you would like to. Once you set up your gold IRA, you can choose to add cash, transfer, or rollover funds from an existing IRA or another retirement plan.
All you need to do is specify the amount that you would like to add. Invest as much or as little as you are comfortable with.
Can Rhodium be included in my IRA?
Rhodium is a silver-white metallic element that is highly reflective and strongly resistant to corrosion. Many investors have their eyes on rhodium. Unfortunately, rhodium is not an authorized IRA precious metal.
Can I store my IRA precious metals myself?
According to the IRS, it is required that precious metals owned by an IRA be stored in the possession of a trustee or custodian. The IRS further states that the trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as a trustee or custodian - 26 U.S. Code § 408.
Some IRA holders have found an alternative way to self-store metals using a "checkbook control IRA", "LLC IRA" or "Home Storage IRA". However, this is not typically recommended because this has not been approved or recognized by the IRS. By choosing a self-storage method, you may expose yourself to IRS penalties. Investors should be cautious of any custodians who offer this type of storage structure.
Can I add/change metals within my Gold IRA?
Your precious metals IRA is not set in stone once it's created. In other words, you have the option to add precious metals and change metals whenever you choose.
If you would like to add to your gold IRA, you can do so by transferring funds from another IRA or retirement plan. Or, you can make an annual contribution to your IRA based on the limits to purchase more metals.
Investors can also trade, transfer, swap, or sell precious metals in their IRA at any time without facing any tax implications.
What storage facilities are available to me?
Choosing a storage facility is one of the hardest and most important decisions that investors will need to make. All custodians offer different storage facilities to their customers. But some popular storage facilities are commonly used. Here is a look at some storage facilities to consider:
Delaware Depository Service Company
Delaware Depository is an exchange-approved precious metals depository that provides a full range of specialized precious metals custody, accounting, and shipping services. Delaware Depository is one of the most preferred storage facilities due to its 146,000 square feet of controlled facilities, robust security system and Class 3 vaults, and $1 billion in all-risk insurance through Lloyd's of London.
Another storage solution is Brink's Depository. This facility enables you to store your valuables with confidence. Brink's offers secure vaults and bonded warehouses to keep your precious metals safe.
The company handles storage, inventory management, counting, and validation. The company also provides transport services for gold and other precious metals. What's even better is that customers are given the option to monitor how their gold is stored using a mobile app that was developed with this in mind.
International Depository Services
Another common depository is IDS. This company offers precious metals storage at three strategically located, secure depositories in North America. These three depositories serve institutional, individual investors, and IRA custodians.
IDS of Delaware is located in New Castle, Delaware. The IDS of Texas is the largest depository in the state. The last depository is IDS of Canada is located in Mississauga, Ontario.
Each IDS depository has maintained the highest credibility with accreditations. IDS is also known to provide state-of-the-art security for stored bullion and data.
What metals aren't allowed in a Gold IRA?
Not all metals are allowed in a precious metals IRA. In fact, the only metals that are allowed are:
Buying gold in an IRA is a great way to diversify your portfolio and secure your wealth. There are a lot of steps involved with buying gold in an IRA but can be easily achieved with the right support.
With that said, be sure to conduct thorough research before choosing a precious metals dealer and IRA specialist. Additionally, be sure to have an understanding of what fees you may face as well as the laws and regulations set by the IRS.
Remember to read out list of the Top Gold IRA Companies.
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