In today’s post, we shall take a look at retirement planning for a gold IRA. If you are hoping to be comfortable and have no financial worries during your retirement years, then this kind of planning is something that you should highly consider. This post will highlight some of the main things you need to do when planning for a gold IRA. Let’s get right into it.
What you should consider before opening your gold IRA
Before opening a gold IRA account it is necessary for you to understand the basics of how these accounts work, and what they entail. Below are some of the basics:
1. Type of account
To get started, you need to know the type of account you will open. Self-directed IRAs exist as either traditional IRAs or Roth IRAs. The difference between these two categories is in the way your money is taxed.
With Roth IRAs, you are required to pay taxes before starting to make contributions to your account. With a traditional IRA, on the other hand, you only get to pay taxes when the time comes to withdraw the money.
2. The annual contribution limits
There is a limit to the amount of money you can invest in a gold IRA, which varies by age. If you are under 50, the IRS allows you to contribute $6000 per year to your self-directed IRA. Upon hitting 50 years, this limit jumps to $7000. The extra $1000 contribution is known as a catch-up contribution.
3. How the precious metal assets will be stored
Precious metal assets invested through a precious metal IRA must be stored in an IRS-approved depository. You may, however, come across some companies promoting “self-storage IRAs, whose legality is questionable. If you go ahead and store the precious metal assets in a safe at your home, you could end up facing IRS penalties and fines, since doing so is perceived as taking a withdrawal.
After hitting 59 ½ years, the age at which you are allowed to begin taking withdrawals, you can have the gold assets sent to your preferred address, for you to store them as you please. You can also withdraw your gold earlier, but you must be ready to pay the 10% penalty.
4. Investment fees
Gold IRAs, like other types of IRAs, come with fees. The common fees you should expect include:
- Set up fees
- Management fees
- Storage fees
The total amount you end up paying may vary depending on the companies you choose to work with, hence the need to do some research and compare different service providers in this industry before settling on any company.
How to start investing in a gold IRA
To get started with a gold IRA investment for retirement, you need to follow the steps below:
1. Choose the right gold IRA company to work with
Picking a gold IRA company is the very first step in the gold IRA opening process. These companies help you start the gold IRA, transfer the funds without getting overtaxed or penalized, buy your precious metal assets, as well as ensure that the assets are shipped to an IRA-approved depository for safe storage.
In some cases, the gold IRA companies act as the account’s custodians, which simply means that they take care of the paperwork and ensure IRS compliance for your account.
Gold has become a popular investment in the recent past, and there are many gold IRA companies worth choosing from. Each company is, however, unique in the sense that it has different fees, services, as well as customer care quality. When opening your gold IRA, you will want to be very careful when analyzing gold IRA companies, to ensure that you get the best services for the fees charged.
Upon choosing your company, you will proceed to fill out your paperwork to open the IRA, so that you can fund the account. During this process, you will be required to have personal details that are necessary for the account opening, so it is important to have all the documents that contain your PID with you.
2. Fund your newly-opened account
There are 3 top options when it comes to funding your gold IRA, including:
You can transfer the funds to your account through cash, wire, or check transfer.
You can use the rollover option if you already have an existing retirement plan. Not all retirement plans qualify for a gold IRA rollover, thus you should consult with your gold IRA company to establish whether it is possible for you to transfer the funds in your existing plan into your gold IRA. Note that you are required to deposit the funds from your existing retirement plan into your gold IRA within 60 days, or you could end up getting hit with a 10% early withdrawal penalty (unless you are over 59 ½ years).
You also have the option to do a direct IRA to IRA transfer. All you need to do is contact your existing retirement plan administrator or custodian, and have them contact your gold IRA company to begin the direct transfer. With this approach, you do not have to worry about meeting the 60-day rollover deadline, because direct transfers take about 5 days, and are tax and penalty-free.
3. Select your preferred precious metals
Upon funding your gold IRA, you can proceed to purchase the assets you will hold in your account.
N.B: You can use a gold IRA to hold any of the IRS-approved precious metals, which include: gold, silver, platinum, and palladium.
Also note that the IRS permits a specific type and purity of assets to be held within the self-directed IRAs, so you will need to be careful about what you select.
The process of purchasing the precious metals is dependent on the company you open your account with. In some cases, the gold IRA company you open your account with will sell you pre-approved precious metals, hence doing away with the hassle of having to shop around for the metals yourself.
With other companies, you will be required to select the precious metals you prefer to have in your account, and then direct your custodian to purchase them on your behalf using the funds you deposited.
4. Monitor the performance of your precious metals
Your ability to effectively monitor the performance of your gold IRA is dependent on the tools and features provided by your gold IRA company. While some companies make it possible for you to monitor the performance of your investments, others do not.
If you need regular updates on the performance of your assets, then you may need to speak to the customer reps in the gold IRA company you intend to work with, to establish whether they offer the means for you to do this.
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Frequently asked questions on “gold IRA planning”
How long will it take for me to open a gold IRA?
The gold IRA opening process is in most cases quite easy if you work with a reliable company. With some companies, you can complete the application process in about 10 to 15 minutes, and wait for about 24 hours for the account to be opened. From there, the rest of the process will depend on how fast you fund the account.
When will I withdraw the funds in my gold IRA?
As per the rules set by the IRS, you can begin taking penalty-free distributions from your gold IRA upon hitting 59 ½ years. Any withdrawals made before this time will attract a 10% penalty.
When should I begin taking my required minimum distributions?
If you have a traditional gold IRA, then you are required by the IRS to start taking required minimum distributions each year, upon reaching 72 years, if you had not already begun making withdrawals. The exact amount you withdraw is dependent on your current age, the nature of your account, etc. You can choose to receive the RMDs in the form of cash, or through the metals you purchased. The failure to take the RMDs results in tax penalties amounting to 50% of the RMD amount.
What types of coins can I include in my gold IRA?
The IRS has its specifications for the type of coins that you can add to your gold IRA. They must meet the minimum fineness requirements, for them to qualify for use for the purpose of investment. Read the articles below for more information on the gold and silver coins that are allowed for use in a gold IRA.
That will be all for today’s post on gold IRA retirement planning. I hope that you enjoyed reading the content presented herein and that you now know what to do as you get started with your gold investment journey for your retirement years. If you need more tips and insights on how to get started, let me know by dropping your question in the comments section, and I will get back to you asap.
I wish you well,
Eric, Investor and Team Member at Gold Retired!