Self Directed Gold IRAs: What You Should Know When Investing

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Some individuals who invest in gold, as well as other types of precious metal, think these kinds of assets are essential for survival in the event the global economy is faced with problems. They believe a universal type of currency is presented by gold and other types of precious metals when a crisis strikes.

That might be true.  However, it is also possible to build wealth for your retirement by investing in gold IRAs. In this article, we will be explaining how a self-directed IRA can be used to invest in gold.

One of the major questions that are asked by people who want to save for their retirement is how their investment growth can be maximized.  

For most investors, relying on CDs. mutual funds, stocks, and bonds have been their main investment sources, especially through an IRA or 401K.

Those traditional assets might not offer as much long-term security or diversity. This is where it can be useful to have a self-directed IRA.

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Investing in different assets makes it possible to maintain their gains and hedge their losses during rough economic conditions, and during market volatility, their assets are more secure.

Fortunately, you don't need to be at retirement age or rich to take advantage of various alternative investment opportunities.

What Is A Gold IRA?

Also referred to as a self-directed IRA, a gold IRA makes it possible for you to invest in various assets that most traditional IRAs do not contain. A self-directed IRAs require you to use a trustee or custodian who will administer the account for you.

However, as the account holder, you can still directly manage your account. The following are some of the alternative investments that a self-directed IRA is allowed to include:

What Is A Gold IRA
  • Silver, gold, and other types of precious metals
  • Real estate
  • Cryptocurrency
  • Oil and gas, water, and mineral rights

A gold IRA is a type of self-directed retirement plan that can be used to invest in precious metals such as gold. You can select from many different types of alternative investments to put into your plan.

Gold is a very solid asset, as long as you are familiar with investment rules.  When your portfolio contains precious metals they provide you with diversity.

There is also the potential to score tax-sheltered gains if gold prices begin to increase you you decide to sell. Other types of self-directed plans can also be used to invest in gold.

You can build wealth by investing in precious metals and adding them to an education savings account, health savings account, and self-directed 401(k).

Investing In Gold Using A Self-Directed IRA

  • A self-directed IRA that contains gold investments is often referred to as a gold IRA. However, this type of account can invest in other types of precious metals as well like palladium, platinum, and silver.
  • The asset is purchased by your IRA and is titled in the IRA's name.
  • Precious metals are required to be held physically inside a depository in the name of your IRA. The protects the asset's tax-advantaged status.
  • Some IRA custodians will have relationships with precious metal storage depository facilities.
  • Not every precious metal is a permissible asset for gold IRAs. Before investing,  know what the rules are for IRA-allowed precious metals.
  • When precious metals are sold that are owned by your IRA, the income is all directly deposited into your account and is tax-sheltered.
  • You are allowed to take a distribution on your precious metals. However, if you do this before retirement age, then you will have to pay early distribution penalties and tax.

What Are Self-Directed IRA Custodians?

The IRS regulations require there to be a gold IRA custodian for your self-directed IRA. The custodian is responsible to keep your investments safe and make sure that all government and IRS regulations are adhered to avoid penalties.

What Are Self-Directed IRA Custodians

Traditional IRA custodians typically are mutual fund companies, brokerage firms, insurance companies, and banks. Although they can service self-directed IRAs as well, it can be more helpful to have a qualified self-directed IRA custodian who is a precious metal investing specialist.

When you choose a custodian who is knowledgeable about self-directed gold IRAs can help you make decisions regarding what kind of precious metals that you should invest in to ensure they are approved by the IRS, especially if you want to do a gold 401K rollover.

If you don't choose a knowledgeable custodian, you could end up with serious penalties that could significantly impact your valuable investments.

It is complicated to decide which company you should choose since it is a highly specialized task that is usually not offered by major brokerage firms.

Look for companies with the following characteristics:

Transparency: When you know all of your costs ahead of time it can help you avoid hidden fees and other nasty surprises after you have invested.

Track record: Search for companies that have excellent reputations with objective third parties, such as Business Consumer Alliance or Better Business Burea. It can be useful to find out what customers are saying about a company.

Also, it can be very useful to find out how many complaints have been filed. Search for companies that do not push a hard sell and are educational.

Flexibility: Every investor has different goals and need. Instead of choosing a company with a one-size-fits-all approach, select one that is going to cater to you.

Qualifications: Only work with a company that holds all of the required and appropriate bonds, insurance, registrations, and licenses to keep your investments protected. Ask for verification of these licenses.

Special Costs

Some special expenses come with having gold in your gold IRA. Investors can be faced with the following changes:

Setup of Retirement account: There is a one-time fee that is charged to get a new IRA account established. That will also vary by institution.

However, it may be higher than the normal setup fee, since not every financial service company handles gold IRAs regularly.

Custodian fees: These annual expenses are charged by all IRAs (in addition to any associated transaction or asset fees), for this kind of account they can be higher, especially when you are using a different financial organization than the one that holds the other accounts you have.

Storage fees: There are also storage fees charged on your gold that are required to be stored in a qualified storage facility.

Cash-out expenses: If you want to sell your gold to a dealer and close your gold IRA, the dealer is going to want to pay less money than what it is currently going for in the open market.

You could end up losing a lot of capital unless prices have increased significantly since you purchased it.

Some IRA companies guarantee they will purchase your gold at the current wholesale. However, by closing your account, you could still end up losing money, which is something that usually does not occur when a regular IRA is opened or closed.

Why Put Gold in Your IRA?

Individual Retirement Accounts (IRA) protect your retirement as well as your family's financial security.

These special accounts allow you to set aside tax protected savings that you can use in the future.   

With these long term accounts it's important to allocate a significant portion to assets that are solid and reliable, so you have a secure and worry-free retirement. 

a couple listening to a financial advisor

You can have cash in an IRA, but that is devaluing at a rapid pace and inflation is out of control

You need an asset that's dependable, retains it's value, and even increases in value over time, and there is no better asset for this than gold. 

With the world's economy struggling through lockdowns, shortages, wars, and inflation, uncertainty has never been higher and investors are protecting themselves by placing physical gold in IRA's. 

A gold IRA investment prospers from these crisis that negatively affect most other assets. 

Risk is knowing the economic dangers and doing nothing to protect yourself and your family. 

Safety is knowing the economic dangers and taking action to protect your financial future, and this easy to do with a gold IRA.

Make Wise Investments

It is important to understand that it is the IRS that sets forth IRA investment restrictions. For example, IRAs are not allowed to invest in jewelry. Collectibles in IRAs are not permitted by the IRS. Only certain kinds of coins have been approved.

Before investing, do your research. Ask for advice from a professional on what types of precious metals have been approved by the IRS.

If you thinking about opening a gold IRA, speak with a financial adviser to find out how the metal can help you achieve the overall goals that you have for your portfolio. Generally speaking, having only one type of asset is never a smart idea.

Even during tough economic times, you can still make wise investments by adding tangible assets to your gold IRA that can potentially help you build wealth that can be used during your retirement.

Quite often gold is touted as being a potential head to all kinds of downturns in the stock market since gold prices typically increase during those times. Therefore, it is worthwhile to consider investing in gold.

Self-Directed IRAs are a great choice for investors looking to add physical gold to their retirement portfolio.  

While they are not the most complicated financial instruments out there, they require knowledge to set them up and work with them correctly.  

This is why we recommend you work with a company with a long track record of helping their clients with Self-Directed IRAs like the ones we have written about on this website.

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