What goes into converting a Roth ira to gold? Is the conversion worth considering? Today’s post will help you understand whether you can move the funds in your Roth IRA into a gold IRA, and what you should expect from doing so. Read on to find out more about this topic.
A Roth IRA is one of the investment vehicles that present an investor with an opportunity to save and invest for their retirement years while taking advantage of the underlying tax benefits. With a Roth individual retirement account, one is required to pay taxes on their contributions upfront, or at the time they are depositing their funds into the IRA so that they do not have to pay taxes when taking their retirement distributions.
Such an arrangement is quite beneficial, moreso in situations in which an investor can tell that the inflation rates will be higher in the future. A Roth IRA provides them with a tax shelter that helps them invest in particular assets, as they wait for their retirement years to come so that they can start taking withdrawals.
Compared to a Roth IRA, a Traditional IRA is structured so that the investor is required to pay taxes on their retirement distributions, not on their contributions. Such an arrangement has its upsides and downsides, but one downside you should be aware of is that waiting until later to pay your taxes could significantly diminish the total amount you take home in the form of distributions, more so if the inflation rates increase consistently over the years.
Roth IRA investors who are looking for extra ways to protect their retirement investment portfolios from inflation often end up converting their Roth IRA into Roth Gold IRAs.
What is a Roth Gold IRA?
A Roth Gold IRA is a self-directed individual retirement account that allows an investor to hold physical gold in their account. Self-directed individual retirement accounts give investors more control over what they can invest in, by allowing them to go beyond the traditional paper assets to alternative assets such as precious metals, real estate products, cryptocurrencies, etc.
With a Roth Gold IRA, investors are mainly allowed to hold physical gold (and other IRA-approved precious metals), but they can also hold other alternative assets, provided that the Roth Gold IRA allows for it.
The rules governing the operation of a Roth Gold IRA are similar to those of a Roth IRA, with the only difference being that the Roth Gold IRA presents an investor with more investment choices and opportunities.
How can I convert my Roth IRA to a Roth Gold IRA?
Roth IRA holders who are interested in expanding the scope of their investment choices can follow the steps outlined below to open and convert their retirement account to Roth Gold IRAs:
1. Find a reliable custodian
The first step lies in finding a reliable Roth Gold IRA custodian so that you can open an account with them. Your custodian should have a proven track record of performance as far as the oversight of IRAs and ensuring their compliance is concerned.
2. Contact your Roth IRA custodian and initiate a transfer of the funds
Next, you need to contact your Roth IRA custodian and inform them that you need them to transfer some or all of your Roth IRA funds to the newly created Roth Gold IRA. Upon providing your Roth IRA custodian with information pertaining to the Roth Gold IRA, and the contact details of the Roth Gold IRA custodian, you can step aside and let the custodians process the transfer of the funds. Doing so will ensure that you are not taxed or penalized by the IRS during the process.
3. Find a reliable precious metal dealer
With a funded Roth Gold IRA in place, you can now begin looking for a suitable precious metal dealer from whom you will purchase the physical gold. There are many local precious metal dealers as well as online dealers, whom you can find by doing a quick search on the internet. Do not forget to read as many customer reviews as you can about the precious metal dealers, and only settle on the one that has the highest ratings and positive reviews.
4. Select a preferred precious metal depository
The gold you purchase from your preferred precious metal dealer will need to be stored in a safe IRS-approved precious metal depository. You should, as such, figure out where your precious metals will be stored even before you purchase them. Your Roth Gold IRA custodian can help you by giving you a list of their preferred depositories, but even then, you should do your research to find out which depositories will be best for you in terms of safety and all underlying storage fees and costs.
5. Purchase the gold
At this stage, everything is all good to go, and all you need is to sign the documents authorizing your Roth Gold IRA custodian to purchase the precious metals on your behalf. The gold will not be shipped to your home but will be shipped to the precious metal depository, where it will be safely stored. You can contact the staff at the depository to organize the viewing of your assets- most of them will welcome you with open arms to their facility.
This is a question that is becoming increasingly common over time, and for a good reason. There are investors on both sides of a heated debate about whether gold is a necessary addition to one’s retirement portfolio. Generally, as per the historical data on the trends of physical gold as an investment asset, it appears that this shiny metal has the following benefits:
- It is a valuable addition to one’s portfolio during times of high inflation, or when inflation is expected to keep on rising (i.e. gold is a store of value).
- Those who invest in physical gold diversify their retirement investment accounts.
- Investing in gold can contribute to the steady growth of one’s investment portfolio over time.
Frequently asked questions on how to convert Roth IRA to Gold?
1. Why should I convert my Roth IRA to gold?
There are many reasons why you can convert your Roth IRA to gold, including the fact that gold brings some protective elements to your portfolio. Physical gold has a negative correlation with paper assets and is thus an asset that is worth holding when a stock market crash is anticipated.
2. Why do retirees prefer opening Roth Gold IRAs as part of their family estate?
Most retirees who intend to leave wealth that is not affected by inflation or taxation for their children or grandchildren often turn to a Roth Gold IRA. This account can be passed on to the next generation, and they can hold on to the assets in it without being required to take the required minimum distributions (RMDs). Retirees who convert their IRAs to Traditional Gold IRAs are required to start taking RMDs upon hitting 72 years, failure to which they are penalized an amount that is equivalent to 50% of the RMD.
3. Is a Roth Gold IRA safe?
Yes. This type of retirement investment account is safe and can be used by any investor who wishes to hold physical gold. The price fluctuations of gold are to be anticipated as always, but there is nothing about a Roth Gold IRA that makes it inherently unsafe.
4. Can I invest in gold without converting my Roth IRA to gold?
Yes, you can. You can purchase gold mining stocks or other paper assets ( ETFs, futures and options, mutual funds) that enable you to gain some exposure to the price movements of gold. You should, however, establish the underlying pros and cons of the gold paper asset you choose to invest in, since most of them may not offer the protective elements that are otherwise offered by physical gold.
Thank you for making it to the end of this post on what goes into converting a Roth IRA into gold. I hope you enjoyed it and you picked some insights that will guide you as you purchase some gold with your Roth IRA funds. Let me know if you have any questions pertaining to today’s topic.
I wish you well,
Eric, Investor and Team Member at Gold Retired!