In today’s post, we shall take a look at how to invest in gold in an IRA. Investing in gold through such a retirement investment structure has in the recent past been gaining popularity, more so due to the state of the global economy. In this article, I will take you through all you need to know if you are new to this industry, or if you simply want to educate yourself about Gold IRA investments. If that sounds interesting, then stay with me till the end of this post.
If you are interested in owning some gold or investing in it with the hope that its price movements will be in line with your financial objectives, then owning a self-directed individual retirement account (SDIRA) account known as a gold IRA might be an excellent way to do it. With an SDIRA, you can invest in a wide variety of assets including precious metals, real estate, cryptocurrencies, and other assets that can help you not only grow your wealth but also diversify your portfolio.
Investing through a gold IRA is not without its requirements. Read on to find out more.
The limitations on how an investor can hold physical gold
To use a gold IRA to invest in physical gold, you need to follow all the rules and regulations stipulated by the IRS. The first rule is that you are only allowed to hold IRS-approved gold in your precious metal IRA. Whereas the list of approved physical gold options may change as time goes by, the IRS stipulates that all the gold must:
- Have a purity level of 99.5%
- Be sourced from a firm that is an accredited precious metal dealer.
- Come in its complete, original casing/packaging
- Have its certificate of authenticity
- If you own gold coins, they must be uncirculated and not be damaged in any way.
- Be of the required unit weight.
Another thing you need to know is that you cannot hold the physical gold by yourself. Although you are the rightful owner of the physical gold, it must be stored safely in an IRS-approved depository. Most IRS-approved depositories offer safe and insured storage of the assets brought to them by their clients. Your gold IRA custodian or gold IRA company will be more than willing to recommend a suitable precious metal depository for your assets.
When will I access the gold stored invested through the gold IRA?
To start withdrawing the gold IRA without being penalized by the IRS, you need to be not less than 59.5 years old. Upon reaching this age, you can opt to withdraw the gold bars or coins and hold them in your preferred storage facility, or you can liquidate them and receive their value in cash instead. Investors who withdraw their gold before hitting 59.5 years end up paying a 10% early withdrawal penalty.
Are there any benefits to owning gold through a gold IRA?
Buying gold through this type of retirement account may be a great way to safeguard your wealth. Some benefits you stand to gain include:
1. Protection of your wealth from economic downturns
Having your money in gold helps minimize losses more so during economic downturns (e.g. stock market crashes).
2. Portfolio diversification
If you put all your investments in one basket, you risk losing a lot of money in case the economy is not favorable. Investing in gold is a great way to minimize the overall risk of your portfolio.
3. Hedging your portfolio from inflation
The gradual decline of the value of the dollar is accompanied by a decline in purchasing power. Gold offers protection against any losses that may occur from such a decline, since its a store of value/wealth.
4. Growth of your wealth
Some investors hold gold over a long-term horizon, with the belief that its value could increase with time. Gold prices have risen over the past decade, which is a good signal to put aside some of the funds in physical gold in a bid to enjoy the long-term growth benefits.
I must, however, not forget to state that investing in gold also presents some unique risks to investors. It is advisable to consult a financial advisor or accountant to help you understand whether holding some gold will align with your financial goals and objectives.
How do I fund a gold IRA to get started with the investment process?
To get started with gold IRA investing, you will need to open a gold IRA account. You can do this by contacting a reliable custodian, or a well-established gold IRA company. Such companies are charged with managing gold IRA accounts, and reporting to the IRS on your behalf, as the gold IRA investor.
Upon creating your gold IRA with your company of choice, you can proceed to fund it in one of the following ways:
- Cash – You can use the funds in your bank account, in which case you are required to send a check or wire payment to your gold IRA custodian.
- Rollover – You can also withdraw funds from your existing retirement plan, and deposit them into the newly-created gold IRA. You are required to deposit the funds into the gold IRA within 60 days of withdrawing them, to avoid getting penalized by the IRS.
- Transfer – finally, you can instruct your gold IRA custodian to contact the custodian of your existing retirement plan, so that they can make arrangements for the transfer of all or a portion of your funds to the gold IRA.
Do not forget that there is a limit to the amount that you can deposit into your self-directed precious metal IRA, which is $6000 for those below 50 years, and $7000 for those aged above 50.
I want to open a gold IRA account, where can I find a gold IRA company?
There are many gold IRA companies out there, all with their varying customer experience, services, and fee schedules. You, therefore, have to take the time to compare what different firms have to offer, to ensure that you end up with the best possible deal. You can take a look at our list of recommended gold IRA companies, as you get started with your search for a reliable company.
Frequently asked questions on “How to invest in a gold IRA?”
1. Can I use my existing retirement plans such as my IRA, and TSP? 401K, or 403B to invest in physical precious metals?
You can only use your retirement savings to invest in physical gold or silver by rolling them over to a gold IRA. Your current employer-sponsored retirement plan may not support precious metal investments, so you have to make the necessary arrangements for a gold IRA rollover. It is also a good idea to speak to a gold IRA expert to determine whether your current retirement plan qualifies for a gold IRA rollover.
2. Is it costly to open and own a precious metal IRA?
The cost of owning a precious metal IRA may vary from one company to the other. You should, however, be prepared to pay annual storage fees for the precious metals, which is a cost that is not incurred by other IRA account holders. The cost of owning the gold IRA may as such be about $200+ more than the regular retirement plan, but this is all dependent on the gold IRA company or custodian you choose to work with.
3. What type of precious metals can I hold in my gold IRA?
You are allowed to hold any of the IRS-approved precious metals in your gold IRA, which includes gold, silver, platinum, and palladium. These precious metals must meet the fineness and purity standards set by the IRS, for physical precious metals that can be used in this type of IRA. Note that some gold IRA companies and self-directed IRA custodians do not support all IRS-approved precious metal investments, hence the need to do your due diligence.
4. Where will my gold be stored?
If you invest in gold through a precious metal IRA, then you should be ready to search for an IRS-approved precious metal depository, in which you can store the precious metal bars or coins. Avoid any company that lures you to open a gold IRA with a home storage option.
That will be all for this post on how to invest in gold in an IRA. I hope you found it informative, and that you now know what it takes to hold some gold in such a retirement plan. Let me know if you have any questions with regards to what we have discussed herein- simply 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!