The priority for investors planning for retirement is to “minimize the risks while maximizing the returns.” In order to accomplish that, clients need to incorporate alternative assets in their strategies along with the conventional paper assets that are relatively standard with retirement plans.
Conventional individual retirement accounts (IRAs) can’t hold alternative investments. These are restricted to self-directed IRAs or SDIRAs. But an SDIRA can hold conventional assets in addition to alternative investments. Most people keep the two separate, however.
Examples of alternative assets include precious metals like gold, real estate, tax liens, livestock, and more. Gold is a favored option for its capacity to act as a hedge against inflation, protect wealth, reduce risks, and diversify holdings in the portfolio.
A gold IRA is not restricted to gold but can hold silver, palladium, and platinum. In the way a conventional IRA offers a traditional or Roth option, gold IRAs do as well. Plus, the guidelines are comparable for conventional and gold IRAs regarding contributions and distributions.
The only way to hold physical precious metals like gold in a retirement account is via a self-directed individual retirement account. These allow the owner to hold physical bullion, either coins, bars, or rounds, in the SDIRA.
If you want to invest in paper gold products like gold stocks, ETFs tracing gold index performances, and on, a conventional IRA will serve that purpose. The SDIRA that holds gold is also referenced as a gold IRA, but these can also hold platinum, palladium, and silver in their physical form.
The IRS has stringent regulations on the physical products based on purity, weight; plus, these must be proof and uncirculated. In order to open a gold IRA, there are specific steps that need to be followed per government guidelines. Consider these tips if you want to pursue a physical precious metals SDIRA.
● The specialized custodian
Conventional IRA custodians aren’t government approved to work with self-directed IRAs, nor do they have the capacity to manage gold or other precious metals for the accounts.
These are specialties that you need to research when trying to find a custodial service. The IRS should offer a list of approved entities for SDIRAs. Check this site https://goldiracompanies.investments to start. You’ll still need to ensure they handle gold or which of the precious metals you want to hold in the account.
When shopping for an appropriate firm, one must ensure competitive price points by looking at the varied fees, transparency, reliability, reputation, track record, and how they handle customer care.
● The annual contribution
Gold IRA funds need to remain within the annual limits. These are the same as with conventional IRAs. Individuals under the age of 50 have a cap of $6000, and people aged 50 and over have an extra $1000 totaling $7000 cap. This is provided in an effort to “catch up.”
Existing retirement plans can be rolled into a gold IRA. These include a conventional IRA or a 401k plan. The guidelines you follow when rolling over into a Roth or Traditional account will apply with the gold IRA.
When looking at a Roth, funds will be taxed before being converted if they haven’t been already. For the traditional plan, funds don’t incur taxes until they are withdrawn.
● The IRA-approved precious metals
The IRS has stringent guidelines regarding the physical precious metals that can be held in an IRA. In order to be eligible, the purity for gold bars needs to be 99.5%, 99.9% for silver, and palladium/platinum, each 99.95.
Coins must be in proof, uncirculated condition, accompanied by a certificate of authenticity encased in the original, intact mint wrapping. For small bullion bars, the weight needs to fall within the exact specifications outlined by the IRS.
These include “palladium bars at 100 oz, platinum at 50 oz, silver at 1000 oz, and gold indicating other than 100 and 400 oz.”
Gold collectibles are not permitted per IRS guidelines, nor are South African Krugerrand or British Sovereign gold coins. The broker can proceed with the transaction if a product notes approval for a physical gold purchase.
The custodial service is responsible for administering and monitoring the accounts, but “SEC guidelines dictate” that this entity isn’t accountable for the gold company or precious metals dealer you use for the products.
The custodian can make suggestions, but ultimately the choice is up to you, the owner, and the custodial service is not accountable. You must make all decisions relating to funding and investing for the gold IRA as the owner.
● The depository
Once a transaction has been completed, the custodial service takes custody of the metal to hold in storage. The storage needs to be held in an IRS-approved insured depository.
The custodian will recommend appropriate facilities with a list from which you can select the ultimate location where you would like the gold to be held.
You can also research and find an approved depository that you feel is better suited for your circumstances, but it must meet IRS guidelines. The precious metal needs to remain in storage until retirement or age 59.5.
The IRS will impose tax repercussions and penalties if you take withdrawals before that time. It will be severely detrimental to your retirement savings.
Final Thought
Holding physical gold in an IRA allows an investor a stable physical commodity that won’t bottom out. Click for a guide detailing gold IRAs.
The precious metal has a history and longevity, deeming it a store of value with the potential to protect retirement wealth, hedge against inflation, and assist with reducing the risk associated with other less assured assets.
A self-directed individual retirement account is the only way to hold physical gold in a retirement plan. With “paper” gold, investors have the option of using a conventional IRA instead of the SDIRA.
The priority is to follow the IRS guidelines as the account owner since you will ultimately be held responsible for all funding and investment decisions.
