Making plans towards your retirement may be quite a challenge. This is especially true in times when the stock market is volatile and the economy is unstable. Traditional IRAs allow an investor to invest in conventional assets like mutual funds, bonds, and stocks. Self-directed IRAs allow investors to invest in alternative assets like precious metals, real estate, cryptocurrency, and so on. This way, an investor can leverage this and ensure proper diversification of their portfolio to ensure they are properly guarded against economic uncertainties and inflation. The importance of portfolio diversification can’t be over-emphasized. about Gold IRA-
Perhaps, this is why several investors are now interested in adding gold to their retirement saving baskets. Luckily, this can be done with a gold individual retirement account. Although this retirement plan is now quite popular, people still have so many questions about it.
So, in this article, we will be answering some FAQs about gold IRAs. We believe knowing the answers to these questions will help you better understand this investment option. We will start by answering the most important question of them all.
What exactly is Gold IRA?
As we have said in the introduction, traditional individual retirement accounts allow investors to purchase and invest in conventional assets. In the same way, people can choose to invest in alternative assets like precious metals with their retirement funds.
Accounts that allow this are usually self-directed. Therefore, gold IRAs are self-directed individual retirement accounts that allow investors to invest in gold as well as other precious metals. This account can also be called precious metals IRAs since they allow investment in other precious metals like silver and palladium too.
Can I Purchase Physical Gold?
Yes, you can purchase physical gold with your gold IRA. These accounts allow you to buy physical precious metals and this may be in bullion bars or coins form. However, the metal must meet certain purity requirements according to the IRS.
Why is Gold a Good Asset for Diversification?
Paper assets like stocks, mutual funds, and bonds are closely related to each other and are usually affected by market volatility. But precious metals aren’t correlated directly with stocks. Hence, even in times when there is so much volatility in the market, your investment value will be retained in gold.
How Would I Go About The Process?
Investing in precious metals with an IRA involves 3 distinct steps.
First, you would need to find a custodian and set up the self-directed retirement account. Once the account is open, you will need to get it funded.
After which, your custodian will refer a dealer, or you would choose one by yourself.
Finally, upon your request, your custodian will purchase the precious metal from your dealer and then have the asset transferred to a 3rd party depository. Ensure that the depository that would store the asset is IRS-approved.
Can I Own Multiple IRAs?
Yes. You can open and use multiple IRAs. However, regardless of how many you have, your contribution limits will still be the same.
Can I Store My Gold At Home?
No. The IRS does not allow investors to store physical metals bought with IRA funds by themselves. This means you can’t store the asset anywhere (not your home or office) by yourself. The asset has to be stored by a 3rd party depository. You can watch this video: https://www.youtube.com/watch?v=M5P7NzN9B0A to learn more about why you shouldn’t own a home storage precious metal IRA.
If the appeal of being able to store the asset yourself is part of the reasons you want to get a gold IRA, then you need to have a rethink. You can buy the precious metal and store it yourself outside an IRA, so you can do this if being able to store the asset yourself is important to you. But, keep in mind that storing the asset yourself may not be the best idea as it would be susceptible to theft.
What is the Role of the Custodian?
For you to own any IRA, you need a custodian that will be in charge of administering the account. The custodian for your self-directed IRA typically isn’t there to give investment advice. However, they have the job of taking care of the administrative aspect of the account.
They also handle the transactional aspect and would be the ones to buy the asset for you once you request them to.
How Can I Fund My Gold IRA?
Once your account has been open, you can fund it by either wiring money to it or via a check. Also, if you have an individual retirement account already or a 401(k), you can send the rollover or transfer funds from them directly to your precious metal IRA.
Since you would be transferring or rolling over the fund from one tax-advantaged IRA to another, you won’t have any tax penalties.
While the fund can be sent to your new account directly, you can also decide to withdraw it and then deposit it in your new account. If you choose to do this, then you need to ensure that the funds are sent into the new account within sixty days of withdrawal. If you fail to do this, then the fund will become taxable.
When Can I Start Withdrawal?
Once you hit 59 and a half years old you may start getting distributions (often penalty-free) from your gold IRA. If you withdraw before you hit 59 and half years, then the withdrawal would be regarded as a distribution. Since it would be seen as a distribution, you would have to pay a penalty fee for early withdrawal.
If you would still like to know more about gold IRAs, then you may visit this page for further information.
While gold IRAs are now more popular, some persons still have a lot of questions about them. Some of the questions answered in this article are probably some you may have asked or wanted to get answers to yourself. So, if you were looking to know more about this special retirement account, then we believe this article has been helpful.