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Frequently Asked Questions about Investing in a Gold IRA

The questions people ask most often on investing in gold through a precious metals IRA.

Disclosure: The owners of this website may be paid to recommend Goldco or other companies. The content on this website, including any positive reviews of Goldco and other reviews, may not be neutral or independent.

What is a Gold IRA?

A gold IRA is a special type of self-directed individual retirement account that lets you own gold bullion and coins, as well as certain other types of precious metals instead of paper assets like stocks and bonds.Also known as a precious metal or gold-backed IRA, this type of account follows the same general rules as a conventional IRA, such as contribution limits and withdrawal rules. Itbenefits from the same tax advantages, which means it can be treated as a traditional IRA, allowing investors to purchase precious metals with pre-tax dollars, or as a ROTH IRA using post-tax dollars.

Gold IRAs can only be used to hold precious metals bars and coins that are allowed by the IRS, and you must store these in a secure depository.

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What are Gold IRA Companies?

A gold IRA company facilitates setting up your new self-directed plan and purchasing the gold coins and bars you choose to invest in. They will also help the investor find a suitable custodian to manage the account and a secure depository for storing their precious metals, who often work in partnership with the gold firm.

A quality firm such as those we recommend in our top 5 gold IRA companies will only work with reputable custodians and storage depositories that they have thoroughly vetted and that maintain good ratings on trusted review sites, such as the Better Business Bureau (BBB), Business Consumer Alliance (BCA), Trustlink and Google.

Usually, the best precious metals companies will also handle insurance, shipping, and liquidation of assets through a buyback program.

Why Invest in Gold?

Throughout history investing in gold has often been looked on as a ‘safe haven’ to protect your wealth from the ravages of economic upheaval, turbulent stock markets, and political unrest.

During these times, the value of paper assets such as stocks and bonds tend to fall; whereas gold prices often climb, leading to the yellow metal outperforming the stock market as it didduring the financial turmoil of the 1970s and early 2000s.

Also, gold is a physical asset, one that is out of reach of the digital hackers and online thieves of today. It can’t go broke or bankrupt like a company, so it will always have value when you are ready to sell it.

Why is Gold an Inflation Hedge?

Gold is often seen as a hedge against inflation, protecting the worth of your retirement assets when the value of the dollar falls due to inflationary pressures.

As the buying power of the dollar is eroded from the effects of high inflation, gold prices (which are quoted in dollars) tend to rise, resulting in every ounce of gold you own being worth more. This means if you hold gold as part of your portfolio, you are more likely to be protected (or hedged) against inflation.

In contrast, certain other investments that seem to offer a healthy return of 5%, for example,will actually lose value if the inflation rate is higher than the return.

Is a Gold IRA a Good Investment?

If you are planning your retirement, a gold IRA can be a good investment as part of your portfolio if you are considering how to protect your savings.

Investors can have more than one individual retirement account; as part of a diversification strategy owning some gold can help both as a hedge against inflation and as a means of conserving your wealth in times of financial uncertainty.

As a self-directed IRA (SDIRA), a gold-backed retirement fund has the same tax advantages as a conventional one, holding stocks, bonds, ETFs, mutual funds, etc. and allowing you to purchase gold and other precious metals on a tax-deferred basis.

Image of gold bullion bars with a chart showing increasing value

How Does a Gold IRA Work?

Understanding how a gold IRA works is fairly straightforward. First of all, you will need to open a new self-directed account with a suitable custodian.

Next, you will need to fund the new account by transferring or rolling over funds from one of your existing retirement accounts such as a 401(k) or conventional IRA. You can also make a cash contribution yourself (subject to IRS limits).

You can then purchase gold or other precious metal products approved by the IRS for holding in this type of individual retirement account and have it shipped to an approved secure storage location.

Finally, when you come to take distributions, you just sell some of your gold for cash, or you can receive the physical metals.

How to Buy a Gold IRA

You can buy a gold IRA yourself by opening a self-directed individual account through an IRS-approved financial institution known as a custodian. You will need to organize funding, purchasing approved precious metals, and storing the gold in a secure depository making sure you follow all the rules and regulations along the way.

An easier way is to work with a trusted gold IRA company that will handle all of this for you. The best firms will provide educational resources on gold and the precious metals markets, guidance on the type of bullion and coins that you can buy, provide access to vetted custodians and storage and even open your account for you, all as part of the service.

How to Choose a Gold IRA Custodian

The easiest way to choose an IRA custodian is to find a reputable precious metals company and work with the one they recommend.

Often the top companies will have vetted and approved the custodian firms they work with and will act as a single point of contact so that you, as the client, only need to give instructions to your customer service agent for buying and selling your assets.

If you prefer to choose the custodial services you work with by yourself, then use trusted resources such as the Better Business Bureau and the Business Consumer Alliance to make sure the firms you are considering have exemplary ratings, consumer reviews, and transparent fees.

What is a Gold IRA Rollover?

A gold IRA rollover is simply a way of funding a new individual account by transferring all or part of the funds from one of the other qualifying retirement vehicles you may hold, such as another traditional IRA, Roth IRA, or a 401(k).

The term gold IRA rollover or transfer is often used to describe the process, although they technically mean different things.

A rollover can be used for moving money between different types of retirement accounts such as a 401(k) to a gold IRA, whereas a transfer can only be used between the same type of account.

This can be achieved without any tax penalties in most cases by following the IRS tax guidelines for IRA rollovers and transfers.

How to Move a 401K to Gold without Penalty

Moving your existing 401(k) to a new gold IRA account without risking any tax penalties is a simple process as long as you follow the rules.

The first step is to talk to your current custodian to advise them of your intentions and find out how long it will take, as well as any fees that may be involved.

To avoid any complications or delays it’s best to ask for a direct rollover from custodian-to-custodian so that the funds go directly to your new account.

There will naturally be some forms to fill in, but if you use a reliable precious metals IRA firm they will provide guidance and assistance to make sure the process goes smoothly.

Photo of a pair of glasses on a 401k investment portfolio

Can I Take Physical Possession of Gold in my IRA?

Once you reach the required age (currently 59 ½ years old) you can take physical possession of the gold held in your IRA without incurring any tax penalties, by liquidating some or all of your precious metals.

Unlike other types of investment like paper assets, when you take distributions from a gold individual retirement account you can have the physical bars and coins shipped directly to your home for you to hold or to sell yourself, rather than just receiving their cash value.

You can still take physical possession of your gold before reaching that age, but it may result in a penalty and losing some of the tax benefits that you had when it was held in the IRA.

Can I Store my Gold IRA at Home?

The simple answer to this question no, you cannot store your gold IRA at home because the IRS rules clearly state that precious metals purchased as part of an IRA must be held with IRS-approved trustees and depositories.

Investors who keep IRA-purchased gold at home could face distribution penalties as the Inland Revenue Service will very likely see this as a distribution; and if under the age of 59 ½, you may face tax penalties as well as losing the individual retirement account tax benefits.

Another risk is that this practice could trigger further scrutiny from the IRS, including a full audit resulting in additional penalties and fines.

Can I Buy Physical Gold in my IRA?

Traditional IRA custodians will not allow you to own physical gold in their retirement accounts as they only allow publicly-traded securities as investments such as mutual funds, stocks, bonds, and sometimes options and futures.

You can hold gold-related stocks and shares or other precious metals funds as part of a conventional IRA, which allows you to at least benefit from some of the advantages of investing in gold.

However, if you want to own physical gold in the form of bullion or coins in your IRA, then you need to set up a self-directed IRA with an approved trustee or custodial service thatallows you to purchase approved precious metals in your retirement account.

What is IRA-approved Gold?

IRA-approved gold is any of the precious metals that meet the IRS guidelines for eligibility to be held as part of a self-directed individual retirement account. Other precious metals that can be held are silver, platinum, and palladium.

You can purchase your gold in the form of both coins and bullion bars, but always check with your broker to make sure the product you are considering meets the guidelines.

As an example, the fineness or purity level of gold must be at least .9950 to be eligible,although some U.S. Mint coins of less than the required purity are still approved, so make sure you have all the facts before purchasing.

Why do People Buy Gold Coins?

People buy gold coins since they are often more desirable to hold onto; and being lighter in nature they are easier to transport as well as less easy to counterfeit. Gold coins are also far easier to sell than a gold bar on the open market, making them a great asset to have in an emergency situation such as economic collapse, natural disaster or war.

However, only certain coins are allowed to be held as part of a gold IRA, and they must meet the minimum purity requirements. Many ‘numismatic’ or ‘collectible’ coins are not eligible,so beware of any brokers who try to convince you otherwise, and always double-check your facts!

Risk Disclosure: All investments including precious metals, such as gold and silver, involve risk and you may get less back than what you put in. Always consult a licensed professional financial advisor before investing your money. Consumers should be aware that past performance does not guarantee future returns.

Disclaimer: The owners of this website may be compensated for recommending certain companies, products, and services. While we endeavor to make sure all our content is accurate, the information we provide may not be neutral or independent and does not constitute financial advice.

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