What is a Gold IRA and How Do Gold IRAs Work
When it comes to retirement plans, there is an unfortunate lack of knowledge among the general public. Considering the fact that an IRA or 401(k) retirement plan is a tax advantaged account which, essentially, can only invest in or hold assets, it is even more unfortunate that the vast majority of individual owners of IRA accounts are often not aware of what can go into them. This lack of knowledge leads to poor investment performance and, tragically, inadequate wealth during one’s retirement years.
I am continuously surprised as to just how many individuals don’t know that their retirement plan can and should hold physical precious metal. In fact, one of the most common questions perspective clients ask is: “What is a gold IRA?” A gold IRA is a self-directed IRA that allows individuals to safely own physical gold, silver, platinum and palladium as part or all of their IRA assets. The types of IRA accounts that are eligible to have physical precious metals are Gold Traditional IRA’s, Gold ROTH IRA’s, Gold SEP IRA’s, and Gold SIMPLE IRA’s. In each and every case, these accounts are designated as self-directed gold IRA’s.
A second most popular question I hear all the time is:
“Can I invest in gold in my IRA?” or “Can I invest in gold with my IRA?”
Of course the answer to the question can you own physical gold in your IRA is a definite “yes”! Gold IRA investing can seem like a mystery, however, it is actually no more challenging or complex than any IRA investing. The best way to invest in gold in an IRA is to first locate a reputable gold dealer. A good gold dealer will work with you and make recommendations based on your goals and objectives. He or she will be able to clearly explain to you how to convert an IRA to Gold in a way that you should be able to completely understand. It’s always best to ask as many questions as you want and not make any final decisions during the first call or meeting. The most reputable gold IRA companies will take time to find out what your unique and individual situation is, and they should make recommendations accordingly.
You should expect to have your gold dealer representative ask you a number of questions regarding your age, number of years until you plan on retiring, amount of capital currently in your IRA, purpose of your IRA (very important), and many others. This questioning is critical and will form the basis for what type of gold and other precious metals you should have in your retirement account. If you find that your gold dealer makes recommendations as to what kind of gold and how much gold to have in your IRA right away, then chances are good that they are not interested in your long term well being, and more interested in only making a sale. This type of gold dealer is not recommended.
Your individual gold dealer representative should have at least 2 years of experience working with different IRA accounts and be familiar with how to invest in an IRA, how to invest in Gold for an IRA and how to put gold in a ROTH IRA. It is tougher to find representatives who have knowledge of SEP and SIMPLE IRA’s, but if you do that is a bonus. The representative should also be very familiar with and able to speak at length about the various aspects of owning physical gold vs. a gold IRA. Both of these options are a smart idea for all as they provide any individual with the highest degree of safety, insurance and security of wealth.
The most common way to convert an IRA to gold or convert a ROTH IRA to gold is referred to as a Gold IRA rollover. Sometimes this is also called a Gold IRA transfer.
The physical gold IRA rollover is a non-taxable event and requires an approved gold, or silver IRA rollover custodian. Your gold dealer representative should absolutely be able to discuss a few different custodians but will most likely have what they consider a best gold IRA rollover custodian available. This custodian should be one that your representative has a solid and time-tested relationship with.
This custodian should be one you can look into and research independently from your gold dealer representative. Keep in mind that not all gold IRA custodians are the same. Their customer service, attention to detail and fees can vary greatly from one company to another. It’s not a good idea to select a custodian purely on the basis of fees and costs. Of course you don’t want to pay too much for these services, so pay attention to the why behind the what when it comes to your gold dealer representative’s custodian suggestion.
In terms of what IRA gold to actually purchase, there are a finite number of choices. Numismatic gold coins for an IRA are not allowed. Collectible gold coins for an IRA are somewhat allowed and bullion gold coins or bars for an IRA are, generally speaking always allowed. Your gold dealer representative should absolutely know what coins can and cannot go into a gold IRA, and why. There are unfortunately many gold dealers that do not give their clients the full and complete picture of all the IRA approved gold coins and bars that qualify for a gold IRA. Few investors realize it is more than just American gold coins that can be used for IRA gold coins. Coins from all over the world are eligible for a physical gold IRA account. The cut off point in terms of what is the right gold to put in your IRA is made with regards to the purity, or actual gold content, of the coin. Of course, other precious metals can be put in your IRA. Silver, platinum and palladium are all coins that can be held in an IRA.
As mentioned previously, you absolutely can invest your ROTH IRA to gold. Because of the tax treatment, some consider the ROTH to be the best gold IRA available. The rules for buying gold in a ROTH IRA are identical to a Traditional IRA. You can convert a ROTH IRA to gold, add gold to a ROTH IRA, and buy and hold gold coins in a ROTH IRA just as easily as a traditional IRA.
The most significant advantage to a ROTH IRA with gold coins comes when you take IRA distributions. The very nature of a gold ROTH IRA means your distributions are tax-free. This is where having a good gold dealer representative can make a huge difference.
Depending upon the total length of your gold coin holding time and what you choose to do with the ROTH IRA gold coins once you take them as a distribution, you might be eligible for further tax advantages in addition to what the gold ROTH IRA offered. Very few gold dealers are able or willing to provide these kinds of in-depth options for their clients. Again knowledge and experience are critical here.
As previously stated, is important to logistically know how to buy gold coins in an IRA, or how to perform a gold ROTH IRA rollover, however there will come a time when you wish to, or are required to, sell gold coins in your IRA. Since you’ve taken the time and educated yourself enough to take action and obtain a physical gold IRA account, it is infinitely critical to consider what your options will be at the time of distribution. Any good investment strategy must have an exit strategy in mind before buying and holding any gold coins, especially in an IRA. Your gold dealer representative should be able to help you with this. If he or she cannot, then find another.
In conclusion you can put gold in an IRA and should hold gold coins in your IRA. The Gold IRA rollover is a tax-free and penalty-free event. There are gold IRA rules, and gold ROTH IRA rules to keep in mind, but these should be the responsibility of your gold dealer representative. Gold ownership will provide three things regardless of whether it’s in an IRA or owned personally by an individual. Those three things are: 1) a hedge against inflation, 2) protection of wealth and purchasing power due to decline of the dollar and 3) profits and growth. Having these safety nets in place, especially in our uncertain economic times, is essential for all and should be a priority for any person.
-by Tom Kelly My Private Bullion