In times of economic uncertainty, such as these, precious metals like gold become the most ideal investment option. Over the centuries, gold has gained reputation as the perfect investment option for investors who are seeking to cushion their wealth from the forces of inflation and economic decline. It is because of this that more and more people are investing in gold IRA rollover as a way of building and protecting their retirement portfolios. However, before getting aboard, it is important that you understand the basics of this investment option, how it works, the merits and demerits and how to invest successfully.
So, what is a gold IRA rollover?
Basically, this refers to the rollover of your retirement investment into a Gold IRA. This means that the money you have set aside for your retirement is invested in gold, which is then kept in your gold IRA account. This form of investment is extremely prudent during times when gold is appreciating in value when the dollar is losing its own. By investing in precious metals, especially gold, you can have the peace of mind that your investment will be protected from economic turbulence.
Understanding How Gold IRA Investments Work
Before making the decision to invest in gold IRA, it is wise to start off by initiating the process of establishing an IRA account. You can get started by having your precious metals broker contact your current custodian to find out if you can add physical gold to your current IRA. Most often, certain rollover IRA to gold plans as well as certain guidelines with your current account may not allow you to invest in precious metals. In this case, you will need to initiate the process of 401k rollover into a new, gold IRA account.
Your broker will then identify a custodian who specializes in gold IRAs. Once selected, you will be required to fill out some paperwork, including the amount you will be rolling into the new rollover IRA to gold account. In addition, you will be required to identify the beneficiaries to be included into the account, along with some other essential information.
It takes 3-5 business days to set up a gold IRA account. Once this is complete, you can go ahead and place gold in your IRA account. Remember, there are only certain products that you can have in your gold IRA account, all of which your broker should be able to offer appropriate advice about.
Making the purchase
The Internal Revenue Service, IRS, prohibits investors from taking possession of the gold while it is part of the retirement investment. Thus, the gold must be deposited with an approved depository. The manager of your gold IRA account will send a purchase request to the dealer of your choice. Once the purchase order is received by the dealer, he will ship the gold to the depository, such as the Diamond State Depository in Delaware or HSBC Bank in NYC. Upon the arrival of the gold, the depository will alert your IRA custodian, who will then document the purchase into your account and release payment to the dealer.
So, which bars and coins can you invest in?
According to IRS regulations, you can only invest in gold bars with a purity of 24 karats or 0.995 or greater in your gold in IRA account. In addition, the bars must be stamped by a refiner approved by COMEX or NYMEX. You can buy various bar sizes for your IRA plan. These include 1, 10, 32, 100 and 400 ounces. Coins for IRA investment must also have a 24-karat purity, or 0.9999 fineness. The only exception to this requirement is the 22-karat American Eagle.
Understanding the tax obligations and withdrawals
Gold IRAs, like other IRAs, are regulated by the same tax rules. Thus, contributions to your IRA account are subject to federal tax. You cannot withdraw the gold from your account until you turn 59 1/2-years old. However, if you choose to make a withdrawal, then you will be required to pay a 10 percent penalty tax for early withdrawal. Upon turning 70 1/2 years old, you will be required to begin making a mandatory minimum withdrawal and pay taxes on your withdrawals. However, if your gold IRA is a Roth account, then you will make tax free withdrawals since you will have already paid your taxes on the contributions. In addition, you will not be compelled to start making minimum withdrawals at age 70 1/2. You will have the option of taking your withdrawals via bank wire, check or delivery of the actual gold.
The Pros and Cons of Gold in IRA investment
Every type of investment has its merits and demerits, and a gold backed IRA investment is no exception. Here are some of the pros and cons of this investment option.
One of the biggest merits of gold backed IRA investing is that the demand for gold is constantly on the rise. This is particularly true in China and India, which are currently the largest gold buyers. In addition, gold is quite easy to buy and sell. This ensures ensure extremely minimal decrease in value. Another impressive advantage is that investors are now treating gold as a hedging tool for their portfolios because of its near zero risk of value depreciation.
Thanks to advances in technology, it is now possible for you to invest in gold IRA online. Thus, you can comfortably invest in gold from the comfort of your living room. This has greatly supported gold IRA investment by reducing the risks of owning the actual gold.
Gold prices are not influenced by inflation, prevailing political and economic conditions and currency values. This makes it a stable investment option for most investors.
The Cons of gold IRA investments
The major drawback to gold backed IRA investment is that gold does not provide any immediate appreciable income. You have to wait long term to realize the value of the income. Finally, you will be required to incur additional costs like insurance and storage costs when investing in gold backed IRA. All these will certainly eat into your portfolio. The flip-side is that these cons are often outweighed by the many more pros as we have outlined so far.
Finding The Right Custodian for Your Gold IRA Account
When investing in rollover IRA to gold, it is essential that you do so through a reputable company. Banks and traditional investment firms do not offer gold backed IRA investments. Thus, you need to work with an industry specialist. Ideally, you need an investment company that can store the physical gold bars for its clients. Here are some of the questions that you need to ask when selecting a custodian for your gold IRA investment:
- Is the custodian certified by IRS?
IRS is the United States’ revenue agency responsible for collecting taxes and enforcing US tax laws. You truly want to be in the IRS’s good graces, and this is why you need to hire an IRS approved custodian. In addition, the IRS certification is an indicator that the custodian is likely qualified to handle clients’ investments. Secure your investment by hiring an IRS certified custodian.
- What is the custodian’s experience in gold investments?
Your retirement portfolio is serious business. Therefore, it is important that you hire an experienced custodian to watch over your financial future. Be sure to hire a custodian who is experienced in opening precious metal IRA accounts. Generally, it is recommended that you hire a custodian with at least two years of experience.
- Is the custodian well established and reputable?
If the custodian has been in operation for years and has provided excellent rollover to IRA gold services, then you will not have trouble finding tons of positive reviews and comments about the company online. To determine the legitimacy of the custodian, be sure to check with the Best Business Bureau (BBB). Do not forget to read customer reviews. Check out our reviews of the top gold investment companies that specialize in IRA rollovers here.
- Will your IRA be backed by real physical gold?
One of the greatest concerns every investor has when hiring an IRA account custodian is that the custodian will make you jump through several hoops before coming in contact with your gold. It is prudent that you get a custodian who will make it easy for you to get hold of your gold whenever you need it. Consider hiring a custodian who offers EFT or paper gold services. You need to access your investment at any time, and if the IRA custodian is not going to allow you to do this, then continue with your search.
- Will the custodian be available to communicate with you?
It is important that you know how your investment is fairing. You are better off hiring a custodian who will maintain a strong communication with you either through phone or email. Ideally, you should develop a strong relationship with your account manager so you can feel comfortable calling him/her from time to time to provide you with account updates.
Mankind has been fascinated with gold for generations. Today, gold is playing a role in retirement plan as well. Rollover IRA to gold investment plans work differently from other retirement plans, especially when it comes to making purchases, asset management and how the account is cashed once you reach the retirement age. With uncertainty surrounding the traditional stocks & bonds market, most investors are turning to alternate investment options such as gold IRAs for purposes of securing their portfolio while delivering long term growth with minimal risk.
A gold IRA rollover is one of the smartest decisions you can make to protect your nest egg from stock market fluctuations, political and national unrest, and most importantly inflation. There are obviously a number of important things to consider before beginning a rollover as we have already discussed, however the benefits outweigh the costs.
Gold has been around longer than Wall Street, big banks, and other traditionally “safe” investment vehicles. Didn’t we already learn our lesson from 2008 that our 401Ks and IRAs are not shielded from economic downturn?