Gold IRA is a type of precious metal investment that allows stakeholders to own physical gold, instead of traditional paper-based assets like cash, stocks or bonds. It was first developed by the American congress in 1997. Nevertheless, to qualify your precious metals 401k with the IRA, there are certain criteria that should be met first.
For instance, they should meet the regulator’s fineness standards and also be held by an IRA trustee instead of the individual IRA owner. The gold should always be stored in a secure IRS-approved depository. Investors are not allowed to stash gold bullion or bars at home in safes or closets. Much of these ramblings have this as the main resource: http://2gov.org/gold-ira/precious-metals/
Why Invest In A Gold IRA?
Depositors often use these precious metals as a form of long-term investment hedge against inflation, particularly to spread their portfolio. Nevertheless, I know that the Internal Revenue Code (IRC) requirements proclaim that the sanctioned precious metals should be stored in a certain specific manner. While some trustees have in-house storage centers for keeping these precious metals, others prefer using 3rd party metals depositories as storage facilities.
The stock market can be unpredictable especially during turbulent economic times. The safest fixed-income investment in such situations is Gold IRA, investing your IRA money in form of gold is a wise decision that will serve you well in the long term.
Typically, this investment appeals more to investors who are in need of a diversified retirement package. Unlike Traditional or Roth IRAs that are prone to inflation, gold prices are usually stable and move in the reverse direction of paper assets. Hence, adding gold IRA to your retirement portfolio can provide a solid insurance plan against inflation. This balanced approach spreads out risk particularly over the long-term period, ultimately making it a perfect choice for those who want to enjoy the fruits of retirement.
IRA-Approved Precious Metals
The government only approves a few select precious metals and bullions to be taken in for IRAs. Holding gold coins instead of bars has more advantages in terms of liquidation returns. Generally, gold bars are harder to sell since they fetch higher prices in the market, and can also be counterfeited much easily. Another thing that makes their value to rise is bulkiness and the high levels of security needed during transportation.
Currently, there are various types of precious metals that meet certain minimum purity requirements acceptable for addition into a certified gold IRA account. Some companies prefer inclusion of certain types of coins in IRA bunkers and not all. However, a couple of these financial firms have been put on notice by the state for misleading customers, as well as aggressively promoting the use of numismatic coins instead of gold bullion for their own personal profit. These numismatic coins often pay the concerned gold companies higher commission rates, but bullion bars reflect the market rates of precious metals more accurately. Some of the poplar investment gold coins that you can buy today include:
- American Gold Eagle bullions
- American Gold Buffalo coins
- U.S Gold Eagle proof coins, and
- Canadian Gold Maple Leaf coins
- Many others
The main issue with ownership of IRA metal assets is getting a trustee who’s willing to put up a self-directed IRA account, as well as handle transfer of funds to the metal dealer and fast-track the actual transfer and storage of coins or bullion. Most of the mainstream brokerage firms will not be willing to enter into such a deal, only a handful of companies would consent to be your partner in handling gold IRA resources.
A typical trustee will only charge a single IRA set-up fee of around $25 to $50, including an annual maintenance fee for preparing account statements and handling paperwork of between $75 and $250. Some may even charge an extra annual fee for storage and insurance of the coins at $125 to $250. Other additional fees may also be included for extra transactions, including contributions to accounts and distributions or purchases and direct sales of bullions or coins.
As an IRA owner, you’re literally on your own in matters of finding a competent metals dealer for selling coins or bullion to IRA, or purchasing coins or bullion from the identified account. But with a small online search you’ll definitely find these dealers.
The physical ownership of these precious IRA metal assets is not a preserve for everyone, even though it has gained some popularity over the last few years, mainly due to increasing prices of gold. Even so, experts estimate that only 2%-5% of IRAs own the real gold coins or bullion.
One viable option for individuals who are not comfortable with having personal coins is purchasing exchange traded fund (ETF) shares, these have the capacity to track the actual value of a precious metal.
Since IRA owners are not permitted to own collectibles, this may result in a potential taxable distribution from your IRA, whereby you may then use the cash to buy certain prohibited EFT shares. Nevertheless, back in 2007 the government passed a friendly policy whereby IRA owners can purchase shares in precious metal ETFs, particularly those that are ranked as grantor investment trusts. This can be done without any tax issues whatsoever.
The most popular virtual Gold IRA sold in form of EFT is GLD, +0.14%, this has been fully certified by the IRS. If you have any doubts concerning your IRA being used as an ETF, then take time to read the taxation section of the account’s prospectus, this is available online. There are those who believe that IRAs aren’t allowed to own any precious metals ETFs, but this is absolutely not true.
Another indirect method of investing in Gold metals is having your IRA purchase stock in a reputed mining company. With this option there are no tax hindrances to worry about.
The gold IRA or precious metals 401k account is an approved source of investment, where the owner is allowed to own gold deposits through certified handlers. It functions quite the same as regular IRA, though instead of having paper assets the owner is in possession of physical bars or bullion coins.