In today’s post, we shall learn about how to convert IRA to gold. As a smart investor, you are most likely looking for ways to secure your financial future or shield your investment portfolio from economic unrest. You may have heard about the ways in which gold can help you achieve this, and in today’s article, you will find out about how you can add gold to your portfolio by using the funds in your existing IRA. Let’s dive into it right away:
If your individual retirement performance has been dismal in the last couple of years and has barely met your expectations, then it is prudent to rethink your investment strategy. Portfolios that do not include precious metals often miss out on the much-needed element of diversification.
You have worked hard and you have imagined what your retirement years will be like, and there is no need to see your vision or dream disappear simply because you did not make a few adjustments.
Those who have been watching and following the news know how quickly things can go south if one tweet creates economic or political tension. This is why you cannot afford to ignore the concept of diversification. There are many ways to achieve this, but we shall take a look at how top investors are converting a portion of their IRA funds to diversify their investment portfolios. More of that is in the next section.
How do you convert your IRA to physical gold?
Whether you currently own a traditional IRA, Roth IRA, SIMPLE IRA, or SEP-IRA, your custodian most likely does not allow you to hold alternative assets such as precious metals. You may be granted permission to purchase gold ETFs, mutual funds that have gold assets, or stocks in gold mining companies, but that is simply it- the custodian will always insist on you holding the traditional paper assets, and perhaps even more conservative assets such as bonds.
If you intend to invest in physical gold through an IRA, you will need to open a special IRA known as a gold IRA with a gold IRA custodian that allows you to hold alternative assets. Check out the steps you should follow below.
Steps to follow as you convert your IRA to Gold
1. Open a new Self-directed IRA
The very first step in the conversion of your IRA to physical gold is for you to open a self-directed IRA. A self-directed IRA, or SDIRA, is a type of IRA that investors use to hold alternative assets. In most cases, the SDIRAs usually get named after the main asset that the IRA custodian allows their investor to hold.
A gold IRA, for instance, is a self-directed IRA that allows investors to mainly hold gold. The fact that it is called a gold IRA does not imply that you are prohibited from holding other alternative assets through it, though you may have to consult with your custodian about their preferred assets.
Self-directed IRAs may be quite complex to oversee, hence most custodians prefer to specialize in certain assets. If you want to invest in gold through an IRA today, therefore, you can turn to a reliable, 5-star rated gold IRA custodian that has a track record of performance in the delivery of excellent gold IRA solutions. Upon selecting your preferred custodian, you can proceed to contact their customer support staff or fill out the IRA application forms on their website.
2. Initiate a Transfer
Before you purchase physical gold, you need to fund your newly-created gold IRA. Luckily, this is quite easy after your gold IRA application request has been approved. All you need to do is to complete a transfer request, and then get back to waiting for the custodians to do what they are good at.
A typical transfer involves you supplying your account number or basic information related to your existing IRA to your gold IRA custodian. Your gold IRA custodian will then take it from there and reach out to your existing IRA custodian to complete the transfer.
No penalties or taxes are involved in the transference of funds from your existing IRA to a gold IRA. If you also own a defined contribution plan such as a 401(k), you can consider transferring some of your funds to your gold IRA.
N.B: You are limited to one gold IRA Rollover per year.
3. Find a reputable precious metal dealer
Most firms that offer gold IRAs allow the purchasing of gold and other precious metals from any reputable precious metal dealers. They may also offer a list of their preferred dealers, but they should not make the decision on your behalf. You have the final say when it comes to your choice of the precious metal dealer from whom your gold will be purchased.
When comparing the available gold dealers, check out their customer reviews and ratings on consumer trust sites. Only purchase your physical gold from trusted companies that have a wealth of experience that comes from being in business for many years.
4. Choose a Third-party depository
The IRS prohibits the gold IRA custodian from storing the assets you purchase through the gold IRA held with them. The physical gold should be held by a third-party IRS-approved depository. Most gold IRA custodians and gold IRA companies offer a list of reputable depositories that they know about, but they may let you decide on the depository you wish your assets to be held in.
If you have the freedom to choose your preferred depository, go with one that is insured by a well-known insurance company, and that is licensed to securely hold precious metals.
5. Purchase the physical gold
The final step of the process lies in purchasing the physical gold. This mostly involves you signing the investment direction form, that eventually makes its way to the precious metal dealer of your choice. This form is sent by your gold IRA custodian and the funds required for the purchase process. The precious metals are then sent to the storage depository for storage.
Frequently asked questions on “How to convert IRA to Gold”
1. How much of my IRA can I put in Gold?
You can put some or all the funds in your existing IRA into your gold IRA. You should make a calculated move since the IRS only allows you to do one roll-over per year. The money you move from your existing IRA to the gold IRA will be used to purchase the gold assets ( gold coins or bars). The custodian will make the purchase on your behalf.
2. Will I pay taxes when opening the gold IRA?
The IRS does not tax you during the rollover process, but this only holds if you do not break the Gold IRA rollover rules. Those who break the rules are taxed and penalized, and often end up having a rough start to their gold investment journey.
3. Can I roll over the funds held in my 401 (k) as well?
Yes, you can. The IRS allows investors to transfer or roll over the funds in their IRAs and other retirement plans to a gold IRA. If you, therefore, have a 401(k) account, you can transfer some or all of the funds in it to your gold IRA, to diversify your retirement investment portfolio. Note that with most employer-sponsored retirement plans, you are required to consult with your employer about whether they allow employers to do Gold IRA rollovers.
4. Am I allowed to hold the gold I purchase in my home safe?
No! Individuals who decide to hold the gold they purchase using their IRAs in their home safes often end up getting penalized by the IRS. There may be an exception if you’re 59 ½ years and above, but those below this age are required to comply and store the gold in an IRS-approved depository.
That will be all for today’s post on how to convert an IRA to gold. Did you find it informative? Do you have more questions about how to do a gold IRA rollover? Would you need some help getting started? Let me know by dropping a comment in the section below, and I will get back to you ASAP!
I wish you well,
Eric, Investor and Team Member at Gold Retired.