A Gold IRA, also known as Precious Metals IRA is an Individual Retirement Account in which physical gold or other approved precious metals are held in custody for the benefit of the IRA account owner. It is not much different from the regular IRA except that it holds physical gold bars or coins instead of paper assets.
An Individual Retirement Account is a type of individual retirement plan that gives an allowance of tax advantages for retirement savings. The four precious metals that can be held in an IRA are gold, silver, platinum, and palladium, provided they are in coin or bar forms. Gold IRAs also allow for diverse investments for the custodians.
- P Morgan said, “Gold is money. Everything else is credit”. Right from time immemorial, gold has been a commodity to measure wealth. Though only a piece of metal, gold is one of the most sought after by many, rich and poor alike.
Some investors are skeptical about investing in gold as it does not pay any interest or dividend. It costs money to store. Other Investors often use gold as a long-term hedge against inflation and to diversify their portfolio.
Since the Great Recession, advertisements have been encouraging retirement savers to convert their cash savings to gold with a Gold IRA. Before you make your mind up, this article will tell you all that you need to know to have a golden retirement.
Before converting your retirement assets to Gold IRA, it is only wise that you note the following:
- Ensure that you have qualified retirement funds, in an IRA or any other workplace-sponsored retirement plan. This can be transferred so that all the cash used comes from qualified retirement funds. This is important because no outside funds can be used to buy gold or other metals.
- There are many precious metals dealers in operation. Be careful to get and compare rates from several dealers and ensure that your final choice is reputable.
Here are a few guidelines to help you choose a dealer:
- Track record
Looking for companies with an outstanding reputation will go a long way in helping you make informed decisions. These companies include the Better Business Bureau or the Business Consumer Alliance. It may also be helpful to dig into what customers are saying about the company.
When you know the associated costs upfront, it saves you surprises and possible hidden charges after investment. This you can do by asking questions.
Every investor has peculiar needs and goals. You should choose a company that will cater to you, rather than a one-size-fits-all.
Licenses, registrations, insurance, and bonds to protect your investments are very important. When scouting for a company for your gold IRA, ensure that they tick these boxes. You may also ask for the verification of those licenses and other relevant information.
Because home storage of gold runs against the IRS guidelines, you will need depository storage to keep your retirement gold.
Beware of the Federal IRA Restriction
Using a self-Directed IRA account to but physical gold or any precious metal involves some rules. For precious metals to be considered for an IRA investment, they must meet the following requirements:
- Gold must be 99.5% pure; Sliver must be 99.9% pure, while Platinum and Palladium must both be 99.95% pure.
- Coins, Bars, and rounds must be produced by a certified refiner, assayer, or manufacturer. These producers are certified by NYMEX, COMEX, NYSE/Life, LBMA, LPPM, LME, TOCOM, ISO 9000, or national government mint. It must also meet the least requirement for fineness.
- The encapsulation must be complete for proof coins with mint packaging and a certificate of authenticity.
- Non-Proof coins or bullion coins must be free from damage and in a brilliant uncirculated condition.
Even though we hate to hear, all investments come with risks and Gold IRA is not an exception. We can even go on to say that Gold IRAs have the same risks any investment has. The price of gold can rise or fall and have volatility. No one can predict its future.
But in spite of the risk, there are a thousand and one reasons to invest your retirement funds in gold. Gold has a long history of being a store of value. Gold may go down, like stocks, but gold will never be worth zero. If the price of gold goes down, the likely hood is that your paper assets will be doing well. So if your balance portfolio is with gold and paper-based investments, a loss on the gold side will balance the gain experienced by other assets. Many of these risks exist for traditional IRAs too. And conventional IRAs also have risks that gold IRAs do not have.
Yet, there are also some risks peculiar only to investing in physical gold. Every physical asset is subject to theft. Someone could break into the depository where your gold is being kept. To qualify for gold IRAs, depositories required insurance, which would protect your gold IRA as long as your account doesn’t exceed the custodian’s stated value.
There is also the risk of some untrustworthy custodians stealing their customers’ gold. This is why it is important to choose a custodian that insures your financial transaction.
In conclusion, if you’re considering a gold IRA, consult a financial adviser to find out how the investment will fit with the goals of your portfolio. It’s never a good idea to put all your eggs in one asset basket. If gold seems like a solid choice for you, Experts suggest putting no more than one-third of your retirement funds into a gold IRA.