In today’s article, we shall look at how to convert an ira to gold and silver. The recent economic trends have forced investors to establish the means to diversify their retirement investment portfolios in a manner that ensures that they are sheltered from market crashes. The conversion of IRAs to gold and silver has been one such approach, as you will learn in today’s post. Hop to the next section to begin discovering more about this topic.
In the present-day world, retirement investors are required to do all they can to protect their wealth from market forces such as inflation, volatility, the decline in the value of the dollar, as well as uncertainty. This is why many bona fide investors recommend converting a portion of one’s retirement investment portfolios to physical precious metals such as gold and silver.
This is popularly known as a Gold IRA rollover, a process that entails the transfer of one’s IRA holdings into their newly-created Gold IRA accounts so that they can purchase precious metal bullion.
A gold IRA is structured in such a way that it allows you to own your precious metal assets either on a tax-deferred or tax-free basis. The gold IRA rollover process allows you to easily create such an account, fund it, and begin reaping the benefits of owning precious metal assets.
N.B: A gold IRA can be used to hold any of the IRA-approved precious metals (gold, silver, platinum, and palladium bullion). You may, however, need to confirm with your gold IRA custodian about the precious metals that they support.
What is an IRA transfer?
As a retirement investor, you are allowed to use your current retirement plan’s funds to fund a gold IRA in one of the following ways:
- IRA rollover
With this option, the custodian of your current retirement plan (e.g. Traditional IRA, Roth IRA, or SEP-IRA), gives you the funds you prefer to withdraw, after which you have about 60 days to deposit those funds into the new gold IRA. If you fail to meet this deadline, you will end up owing the IRS a 10% early withdrawal penalty on the amount received, if you are still under 59.5 years.
For a transfer, your IRA custodian follows up on your request to send the funds directly to the gold IRA custodian. With this option, no cash leaves the account, which generally ensures that you do not risk getting penalized by the IRS. This is the generally-preferred option since it takes away the temptation to start spending the funds, with the hope of recovering them and sending them to your gold IRA custodian.
How do I Open a Gold IRA?
To open a gold IRA, which is essentially a more specific term that refers to a self-directed IRA that allows you to invest in gold and other IRA-approved precious metals, you need to find a custodian that specializes in such accounts.
Upon filling out the required paperwork, you will be required to wait for the gold IRA custodian to approve the application.
Next, you will need to fund the newly-opened account, then proceed to choose the gold or silver you would want to invest in. You then have to direct the gold IRA custodian to buy the precious metals on your behalf, as is required by the IRS.
After the purchase has been made, your gold and silver will be moved to an IRS-approved precious metal depository for storage.
How to convert your existing IRA into a gold IRA
After you have created a gold IRA, converting the funds in your other retirement plan into gold and silver should be straightforward. Here are the steps you will be expected when dealing with most custodians:
1. Contact the administrator of your current IRA
Inform them that you want to convert your funds to gold and silver.
2. Fill out the required paperwork
You may need to indicate in writing how much money you need to withdraw from your current plan.
3. Wait for the IRA custodian to send you the funds
Upon receiving the funds, you can proceed to deposit them into your newly-created gold IRA. You should do this within 60 days after initiating the rollover process.
4. Select the gold and silver products you want to purchase
Note that only certain coins and precious metals are allowed for investment purposes when it comes to IRAs. Your custodian will help with ensuring compliance as far as this matter is concerned.
5. Direct your gold IRA custodian to purchase the assets you selected
The custodian will use the funds you deposited into the account to purchase the chosen precious metals.
6. The precious metal assets will be shipped into a depository for safe storage
At this stage, you may come across some companies advocating for the storage of your precious metals at home. Be wary of such companies, since attempting to store your gold at home could lead to the IRS not only penalizing you but also doing a comprehensive audit on your holdings.
After the 6th step, all that is left is for you to just access your account statements as you monitor the performance of your assets. Your gold IRA custodian (company) may have sufficient online tools to help you do this.
Gold IRA transfer fees: What to Expect?
The IRS does not charge any fees during a gold IRA transfer. Your account administrator could, however, charge a fee, though this is dependent on the existing company policies. It is, therefore, necessary for you to contact all your existing IRA custodians, as well as the gold IRA custodian, and request them to inform you about any fees that they will be charging you during the conversion of your IRA to gold and silver.
What are the tax implications of the conversion of an IRA to gold and silver?
One of the main benefits of a gold IRA is that it protects you from incurring potential penalties that come with such a process. With a rollover, you are subject to paying a 10% penalty if you do not deposit the funds received from your existing IRA’s custodian into your gold IRA within 60 days. You are also limited to a single rollover per year.
If you decide to do a transfer instead of a rollover, the funds will be sent directly to your gold IRA custodian, which in itself minimizes the chances of you incurring additional fees and penalties. Also, since there is no money to be withdrawn and given to you, the money will not be subject to taxation by the IRS.
Why should I consider transferring my IRA funds to a gold IRA?
There are several benefits that come with the transfer of your existing IRA funds into your newly-created gold IRA, including:
1. Opportunities for growth
Just like any other asset, gold could grow in value. Its prices have risen over the past decade, and this essentially means that if the trend continues, then your portfolio will be worth more over the next half-decade or decade.
It is not very wise to put all your money into a single asset or investment class. Gold and silver offer a great way to diversify one’s investments, hence reducing the overall risk level for their holdings.
3. A hedge against inflation
Whenever the value of the U.S. dollar drops, so does your purchasing power. Having precious metal investments protects you from such losses since the value of gold and silver generally outpaces the loss of value of the dollar.
If you are not sure about the Gold IRAs and what they have to offer, you can request a gold IRA kit from popular gold IRA companies, or you can talk to your financial planner for them to advise you on how to go about it.
Frequently asked questions on “How to Convert IRA to Gold & Silver.”
1. Which retirement plans are eligible for a Gold IRA Rollover?
You can do a complete Gold IRA rollover by transferring your funds from any of the following types of accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- Defined contribution plans such as 403(b), 401(k), 457(b) and TSPS
2. Can I open a gold IRA and still hold on to my other IRA?
Yes, you can. You, however, need to consult with an IRA expert about the total amount that you can contribute to all your retirement plans.
3. How many times can I roll over the funds in my existing IRA to my Gold IRA?
The IRS allows you to do one IRA rollover per year. If you attempt to do a second rollover, then you will risk getting penalized by the IRS. This law does not apply to the number of transactions that you can do within the IRA.
4. How much will I pay in fees, during the Gold IRA Rollover?
The IRS and the government do not require you to pay any fees during the rollover process. Your custodians may, however, charge some rollover fees, and these may vary from one service provider to the next one.
That will be all for today’s article on how to convert an IRA to Gold and Silver. I hope that you found it informative and that you now know what the process entails. If you have any questions about the process, and how you can go about it, drop them in the comments section and I will get back to you ASAP!
I wish you well,
Eric, Investor and Team Member at Gold Retired!