Have you heard more people talking about all the reasons to open a Gold IRA? Does the idea of diversifying your portfolio by investing in gold and other precious metals sound appealing to you? If so, then you may be interested in setting up a Gold IRA.
Developing an interest in Gold IRAs is just the first step in the process. Now, you'll want to learn more about exactly what a Gold IRA is, how these plans work, and what you'll need to do to open your own Gold IRA. Keep reading because this is precisely what we're going to cover in this article.
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What is a Gold IRA?
Gold IRAs are one example of a Self-Directed IRA. With Self-Directed IRAs, you are allowed to invest in alternative assets, like gold and silver. Compare this to traditional IRAs that only allow you to invest in stocks and bonds.
What are the Benefits of Opening a Gold IRA?
If you're here reading this article, you probably already know some of the benefits of investing in gold. However, there are many benefits, and you may not be aware of all of them, so let's do a quick review before of why you should consider opening a Gold IRA before we look into specifics about how the plans work.
With all of the economic uncertainties that we are facing, one of the biggest reasons to consider a Gold IRA right now is to provide a hedge against inflation. Even if the value of the dollar falls with inflation, the value of gold is not directly tied to the value of the dollar, so it will remain more stable. This can be invaluable during recessions and depressions, when your funds in the stock market (and even your bank account) may be really suffering.
Investing in precious metals, such as gold, also serves the value of adding some diversity to your portfolio. With your funds invested in different revenue streams, you're less likely to be severely impacted if any one area suffers a huge loss. For example, if the stock market crashes, the gold and silver in your account will help balance your overall portfolio, lessening the blow.
With you combine the fact that there is a limited supply of gold with the high demand there is for this precious metal, you can see why many financial experts recommend adding it to your portfolio. As demand continues to rise, it is likely that gold's value will also increase.
What are the Different Types of Gold IRAs
There are a few different types of Gold IRAs that you can choose from. These include traditional Gold IRAs, Roth Gold IRAs, and SEP Gold IRAs. Each of these account type mirrors their non-gold counterparts, but we'll take a closer look at their differences in the next few sections.
A traditional IRA is the type selected by most investors. With this type of IRA, you're able to deduct the amount you contribute to your taxes. The funds in your account are not taxed until you take disbursements when you reach the age of retirement (at least 59 ½). Traditional IRAs are often selected by people who think they'll be in a lower tax bracket when they retire.
Roth IRAs are often seen as the best choice for individuals who anticipate being in a higher tax bracket when they retire. With this account type, the funds you contribute are pre-taxed at your current tax rate. This means that when you retire, you'll be able to withdraw funds from your account without having to pay any additional taxes.
In most cases, a Traditional or Roth Gold IRA will be the right choice for you, but you may also qualify for a SEP Gold IRA. If you are self-employed or a small business owner, a SEP IRA can help you invest in precious metals as you save for retirement. The contribution limits for SEP IRAs are different from those for Traditional and Roth IRAs; you are allowed to contribute up to 25% of your compensation, with a maximum of $66,000 for 2023.
How Do You Set Up a Gold IRA?
The first thing you'll need to do when you're ready to set up a Gold IRA is to find a Gold IRA company to work with. The company you choose will provide you with the required paperwork to get your Gold IRA opened up. If you've started doing any research on Gold IRAs, you've probably noticed that there are dozens of companies out there that offer IRA services.
One benefit of having a large number of companies to choose from is that you'll be able to search around to find one that offers just what you're looking for in terms of products and customer service. However, the downside to there being so many different options is that it can be really difficult to weed out the companies that claim to be the best, but really offer sub-par service.
One thing you can do to help you make this important decision is to check each company's ratings with the Better Business Bureau. Looking for Gold IRA businesses that are not only accredited with the BBB, but that are also highly rated. The highest rating that the BBB offers is an A+. You can also check to see how the Gold IRA companies you're considering working with are rated with the Business Consumer Alliance, or BCA. Their highest rating is an AAA. Searching Google, Trustpilot, Facebook, and other review sites to read reviews from past clients can also be very informative.
Doing your own research is always important, but we wanted to share the Gold IRA company that we most strongly recommend. We think you'll be very pleased with the attention and quality of service you'll receive when you work with Goldco. Trevor Gerszt started Goldco in 2006. Today, after more than 15 years in the industry, Goldco is a leading company. They are well respected, have earned top reviews from their clients, and have been given an A+ by the BBB and an AAA from the BCA. Working with Goldco is a wise move if you're looking for the best of the best in terms of Gold IRA companies.
Right now, Goldco is offering an incredible promotion for clients that open a Gold IRA. You may qualify to receive 10% of the value of your IRA back in free silver. This special value (up to $10,000) will serve to further enhance your portfolio and increase your holdings in precious metals.
How Do You Fund a Gold IRA?
One of the most common options for funding a Gold IRA is to complete a direct transfer from an existing retirement account to your new Gold IRA account. A Gold IRA custodian will be in charge of completing this transfer. They know all the tax regulations and will move the money according to IRS rules to ensure that you are not charged any taxes or penalties.
You can also fund a Gold IRA by completing an IRA rollover. This is similar to the transfer option shared above. However, the funds will be deposited to your personal account, and you'll need to move them to your precious metals provider. With this option, you could face penalties if you do not move the funds to the new account within 60 days. This is why many individuals choose to complete an IRA transfer with a custodian.
You can also fund an IRA with cash. However, you'll only be able to add the maximum contribution amount, which is currently set at $6,500 for individuals under 50 and $7,500 for people 50 or older. If you choose only this option, you may not meet the account minimums for some precious metals providers.
What Precious Metals Can You Add to a Gold IRA?
At one point, individuals were only allowed to hold Gold and Silver American Eagle Coins in their Gold IRA. Fortunately, the IRS has since expanded the rules to allow individuals to add several coins and bars to their account. However, the possibilities are not completely endless. Each coin or bar you wish to hold must meet the minimum purity standards that the IRS has laid out. This means that gold coins and bars need to have a minimum purity level of 99.5% (with the exception of the Gold American Eagle Coin, which is 91.67% pure). Silver bars and coins must be at least 99.9% pure, and palladium and platinum coins must have a minimum purity level of 99.95%.
Each precious metals provider will have a slightly different selection of coins and bars. Some will offer more options than others. It is always a good idea to preview the different options before committing to work with a company. This will help you confirm whether any particular coins or bars that you want to hold are available or not.
Below, you'll see a few of the different bars and coins that you may find available through different precious metals providers.
Gold
Silver
Platinum
Palladium
Where are IRA Precious Metals Stored?
With very few exceptions, precious metals for a Gold IRA must be held in an IRA-approved depository. This means that you are not permitted to take possession of your precious metals or store them in a private vault or safe deposit box at a bank. If any company tries to tell you that you can store your IRA precious metals at home, it should be seen as a red flag that you may want to consider choosing a different Gold IRA company to work with.
Each Gold IRA company may work with different IRS-approved depositories, since there are a few across the country. For the most part, regardless of which depository your metals will be stored in, you should be able to rest easy knowing they are secure. The IRS only approves trusted depositories with exceptional security measures. Between the highly secure vaults, video monitoring, and various other safety measure that are in place, your metals will be ready for you when you reach retirement age and can start taking them out. Full-coverage insurance policies are also held by each depository. This means that you will be reimbursed in the highly unlikely event that your bars or coins are damaged.
How Much Can You Contribute to a Gold IRA Each Year?
The IRS sets yearly contribution limits for IRA holders. These limits are subject to change, and were actually just revised for 2023. As of right now, you can contribute up to $6,500 if you are under 50 years old. This is up from the previous contribution limit of $6,000.
Those who are at least 50 years old are able to contribute a little extra to their IRA accounts. Their contribution limit is $7,500, which is $500 more than the previous limit of $7,000.
If you plan on having a Gold IRA along with a traditional IRA that holds stocks, you'll have to split your annual contributions between both accounts. The limits stated above are the total you can contribute to any IRAs, not individual limits for each account. So, if you're under 50 and have two IRAs, you can choose how to split your money between the two accounts. For example, you could split is evenly and add $3,250 to each account. Or, you could split it unevenly with $2,000 going to one account and 4,500 going to the other account (or any other configuration you desire).
How Long Does it Take to Set Up a Gold IRA?
Setting up a Gold IRA doesn't take very long. Completing the application and paperwork with the company you choose to work with should be pretty straightforward and should only take a few minutes of your time. The part of the process that will take the longest is waiting for the account to be funded. If you complete an IRA transfer, the funds may take between a week and 10 days to hit your new IRA account. Funding your account with a wire transfer from a personal bank account should take a similar amount of time, or possibly up to a few extra days.
When Can you Make Withdrawals from a Gold IRA?
While you could make withdrawals from an IRA whenever you want to, doing so before the age of 59 ½ is not a good idea. 59 ½ is the age the IRS has identified when individuals are able to start taking disbursements from their account. If you are in a really tight spot and need access to the funds before this time, be ready to have whatever you take out count as taxable income. Other fees or penalties may also apply.
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