Preparing for the future is a big deal for anyone who wants to have a stress free retirement. There are many ways of preparing for the future and one of those ways is Individual Retirement Account (IRA).
IRA is a savings account that’s used by income earners to save for retirement. This long term savings help users to enjoy the tax advantages that come with it. It is specifically designed for self-employed folks who cannot access retirement accounts that employees have. One of these accounts is 401(k) and as we implied earlier, it can only be accessed through one’s employer.
An IRA can be opened either through an investment company, a bank, a personal broker or a bank. The account holder can invest in different financial products such as bonds, stocks, mutual funds and ETFs. There are many types of IRAs and each of them has their rules and regulations.
In this article, we will discuss one of the latest types of IRA which is precious metals IRA. More and more people are diversifying their portfolio by investing in precious metal. So we will share some tips on how to take advantage of this option.
What is Gold IRA?
Gold or Precious Metals IRA is a specialized account that enables the investor to hold gold and other precious metals as part of their retirement investment. People with this account can hold their assets in the physical forms such as coins or bullion. They can also hold securities that are related to precious metals in their portfolio.
This type of Individual Retirement Account has to be separate from the regular IRA. However, the rules concerning issues such as contribution limit and distribution are the same. We have already stated the many ways that one can open this account which includes through a bank or a broker or any other type of government-approved custodian.
A gold IRA is a good alternative for people who want to take advantage of the stability of precious metals. You can open a new account for this specialized IRA or you can rollover your IRA into precious metals especially if you don’t have extra cash for a new account.
How to Open a Gold Individual Retirement Account
Also known as a Precious Metals IRA, opening a Gold Individual Retirement Account is a little bit more complicated or harder than opening the regular types of IRAs that exist. Below are the steps to follow to open this account:-
Choose a Custodian
You cannot open a self-directed IRA (which is what this account is), without a custodian. These custodians are either trust companies, banks, or other organizations that the IRS approves. They are the ones that facilitate the consumers’ investments in alternative assets such as precious metals and others.
It goes without saying therefore that the first step to getting the best of this savings account is to get the best custodian that will work in your best interest.
Choose a Dealer
After choosing a custodian, the next choice to be made is that of a dealer. When you choose a dealer, you will then instruct the custodian to send money to them to purchase the precious metal of your choice.
You have to research carefully to find a reputable dealer and one who will always give you great deals. It is recommended that you work with only dealers who are members of trade group such as the Industry Council for Tangible Assets (ICTA), the American Numismatic Association (ANA), or the Professional Numismatists Guild (PNG).
You can also decide to work with a dealer recommended by your custodian. Whatever you do, ensure that you do your due diligence and confirm the quality of service/products they offer.
Decide on the Product to Buy
The final decision on the product to buy rests solely on you but you are advised to work with the dealer in making this choice. The custodian can sometimes weigh in especially those that also serve as your financial advisors.
One of the most common gold products that investors like to buy is the American Eagle Bullion Coins. But there are also other products that you can choose from. Just ensure that you carry out your research on which product is most profitable for you before making a choice.
Choose an Approved Depository
One of the rules of precious metals IRA is that the physical commodities cannot be stored at home. You must store them at an approved depository. Therefore choosing a depository is one of the steps in the process of opening your precious metals individual retirement account.
Ensure that the company you choose meets all the requirements of the IRS (Internal Revenue Service). This therefore means that you should find out these requirements so that you will not run afoul of the law in your choice.
How to Rollover your IRA to Precious Metals
Rolling over your existing IRA to a gold IRA is a straightforward process. All you need to do is to collect the amount you want to invest in the gold IRA from the custodian of your existing account and deposit it into the precious metals account.
Bear in mind that with a rollover, you have 60 days to pay in the money you withdrew from the exiting account into the precious metals account. If you are under 59 and half years and you miss this deadline, you will pay a penalty of 10% of the amount withdrawn.
Most IRA custodians are usually willing to facilitate rollovers for their clients so always talk to your existing custodians first before exploring other options.
Investing in gold is a good way of diversifying your investment portfolio. In the same vein having gold or precious metals in your retirement savings portfolio is a smart financial move. But it is important that you do your due diligence before embarking on any of these ventures. This is so that you will not end up disappointed in your golden years.
We have shared some pertinent information in this article that will help you make informed decisions. Do bear them in mind as you seek to secure your golden years.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.