What is a Gold IRA Rollover?

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If you want to know what a gold IRA rollover is, then you need to know two different things.

The first is what a gold IRA is by itself. The second is what a rollover is.  

Do you know what an IRA is? It stands for Individual Retirement Account. It's a tax-advantaged investment account designed to help you save money for the future, often retirement.  

IRAs can include many different kinds of investment assets, and many focus on things like stocks, bonds, and real estate. A gold IRA revolves around precious metals. That might include silver, platinum, and palladium.  

You need a broker to set up your gold IRA and maintain it. You'll also have to fund the account, and that's where a rollover can come into play. That's when you fund your gold IRA using investment resources from other retirement accounts.

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Why Do a Gold IRA Rollover?


Doing a gold IRA rollover lets you move retirement savings from one kind of investment to a different one. This lets you diversify your overall portfolio.

You can also minimize the risk of losing some of your wealth. A traditional IRA account or a 401(k) might be an account where you already have investments in place.

cartoon of woman looking at taxes and a calculator

These are the kinds of accounts you can usually do a rollover from. However, there are certain things you'll need to ascertain before making a transition of funds.  

One of them is how much money you are going to transfer from the previous account into gold. You'll also need to determine how much of your precious metal holdings will be covered by the minimum initial purchase amount.

This is also known as a MIPA, and it's an amount that must always remain present in your gold IRA rollover.  

Once you have made decisions on these particular details, then you can proceed with transferring funds from your old retirement account into your gold IRA. One immediate advantage of doing this is the diversification of your overall portfolio

A second benefit is potentially moving high-risk assets into an alternative asset class more likely to preserve your wealth when faced with economic uncertainty or inflation.

Why Use a Gold IRA?


A gold IRA lets you save for your retirement by investing in gold and precious metals. That's the first benefit of doing so. The second is having access to the IRA tax advantages.

Historically speaking, precious metals retain their value over time.  They often do so better than stocks and bonds.

a couple listening to a financial advisor

Gold investments maintain their value and even grow in overall worth over time.  Using an IRA means you can defer taxes.

Rather than pay taxes when you make contributions, you don't do so until you make withdrawals. Anything invested in your account compounds free of taxes in the account until later in life when you have to start pulling it out.  

A gold IRA isn't perfect, however. It is limited in the kinds of investments you can pursue. They namely have to be gold, although silver, palladium, and platinum might be possible with the right broker.  

You can't invest in other asset classes with a gold IRA. If you want stocks, bonds, mutual funds, ETFs, or real estate in an IRA, then you'll have to open a different account. However, you are certainly allowed to do so.

Declining Dollar Values


Government policy at the federal level has resulted in the American dollar being devalued for many years. This has been going on for quite some time. It's also likely to keep happening for years to come.  

Owning precious metals is a great way to get around this problem. Gold and other precious metals don't have their values go down dramatically overnight like paper assets do, including stocks and fiat currency.

Gold also stands up well when faced with inflationary pressures that dramatically hurt the dollar.  When you deposit gold and other precious metals into a gold IRA, you don't reduce your contribution limits.

That's because you're paying using after-tax dollars. As a result, you can save even more money for retirement.

Gold IRA Advantages


A gold IRA is an account where you buy and hold physical bullion. This is stored in an IRS-approved depository or storage facility. That safeguards your investment against the risk of theft, loss, or accident.  

As someone who owns a gold IRA, you'll get annual tax deductions for your investment. Such deductions will vary based on the volume of gold you are holding and the specific kind of account you create.

However, these deductions often wind up being bigger than what you get from other kinds of IRAs.  

A traditional IRA means you don't pay any taxes on either the account earnings or contributions until you start making withdrawals closer to your retirement years. 

Things are similar with a Roth IRA, aside from the option to withdraw earnings free of taxes after just five years passed the initial contributions. In both cases, contributions can be tax-deductible, provided you meet certain conditions.

What About Roth Gold IRAs?


You can invest in a Roth gold IRA using after-tax money. This can have certain tax advantages, provided you meet particular requirements.

A gold IRA might not be the best choice for everyone, so you need to consult your tax professional before choosing to use one for yourself.  

Congress created Roth IRAs with the Taxpayer Relief Act of 1997 which President Bill Clinton then signed into law. At the same time, Roth 401(k) and 403(b) plans were also created.

A Roth IRA, with the right conditions, can give you both tax-deferred earnings as well as withdrawals that don't get taxed.  A big difference between any Roth IRA and other individual retirement accounts is how contributions get taxed upfront.

Other IRAs can use pre-tax income for their funding. This is a difference that applies to gold IRAs and Roth gold IRAs.

More About Gold IRA Rollovers


A rollover for your gold IRA lets you transfer funds from conventional IRA and other retirement plants into your self-directed IRA where you invest in precious metal coins, bars, and bullion.

The gold IRA rollover is simply when you move money from a previous financial institution to your new one. A rollover gets its name from the fact that this process takes time instead of all happening at once.  

You may be the kind of investor who has been saving for your future retirement for years already. However, you might not have yet hit the age of 59 1/2.

That's when you can start making IRA withdrawals without paying penalties or income taxes on your distributions.  A rollover means you can use certain investment funds without paying taxes on them.

When done right, a gold IRA rollover won't trigger taxes or penalties. This is despite the fact the money is being moved from one account to another since both accounts are tax-advantaged for retirement purposes.  

If your total investment portfolio has grown enough in value, then you might think it's time to diversify outside of just stocks and bonds. Precious metals are an alternative asset class that usually moves differently than paper assets.

As you get older, you might want some of your portfolio to be a bit more conservative in the face of economic turmoil.  

Another reason to do a rollover is to escape the potential limitations of 401(k) and 403(b) plans. Employer-sponsored plans might have limited investment options, or they could be run by fund managers. A self-directed IRA lets you make your own choices.  

There are two kinds of rollovers possible. One is a direct rollover. The second would be an indirect rollover.

  • Direct Rollover

In a direct rollover, you tell your prior financial institution to transfer your IRA or 401(k) funds right into the gold IRA. There is no IRS requirement that you get personally paid before the transfer. This is the simplest, safest, and quickest way to do things.

  • Indirect Rollover

With an indirect rollover, the funds would be distributed to you first. Then, you would have 60 days from receipt of the check to decide where you want to move the money.

If you take more than 60 days, then you'll face penalties and taxes you could have otherwise avoided.  

Depending on what you read about rollovers, you might hear about a rule limiting you to how much money you could roll over in any given year before hitting tax penalties.

This rule was repealed in April 2010. It no longer applies, so you don't need to worry about it.  

That's very beneficial for anyone who switches employers regularly and doesn't want to litter their portfolio with 401(k) plans from each job. They can keep doing rollovers and keep their portfolio as intact as possible in one place.

Why Should You Own Physical Gold?


Kids learn at an early age that owning gold is a status symbol of wealth and affluence, but it's also not a lie.

Owning physical precious metals means you have a tangible asset, and it's situated outside of normal banking systems and stock markets.

stock market chart

Precious metals can be a successful hedge against economic uncertainty, currency devaluation, and inflation. 

Government can't print or conjure up precious metal coins like they can with fiat currency. Precious metals are mined out of the ground and hold physical value because of that.

That's why they are protective barriers for your portfolio from currency devaluation and inflation, which are both common threats to many currencies in the modern economy.  

Inflation happens when there's simply too much money being circulated in correlation to the values of goods and services currently available. Rising prices happen, and that diminishes the buying power of money.

Governments that print additional banknotes without backing them with tangible assets, be it precious metals, oil, or other commodities, contribute to currency devaluation.  

When this happens, you need more money to buy gas and food than you use to before. That's because inflated prices make everything cost more. At the same time, the value of the dollar goes down since it won't buy what it used to.  

Inflation might be a predominant concern right now, but a stock market crash is another time when precious metals can save your portfolio.

During the Great Recession of 2008, investors who had exposure to precious metals saw their portfolios rebound faster than those who didn't.

While stocks and bonds plummeted seemingly overnight, precious metals don't, and that meant that some investors had an anchor to rely on that gave the rest of their portfolio time to recover its value.

Who Should Consider a Gold IRA?


Saving up for retirement is a financial priority for most working American adults. Social Security is supposed to help people with retirement. However, not everyone might qualify, and very few would be able to live off of it.  

Further compounding matters is how many people have access to employer-sponsored plans for retirement through their jobs. Just over half of working Americans can access a 401(k) or something like that. Even if you can, saving in one isn't always easy.  

IRAs help fill the gap, and self-directed IRAs give you power. Including a gold IRA lets, you diversify your portfolio. You might want one even if you have a 401(k) just because precious metal investing might not be an option on your employer's table.  

A gold IRA is a great option for anyone who wants to keep some of their money out of trouble. Part of that can mean keeping it out of the hands of the government, given the tax benefits involved.

However, it can also mean keeping investment funds out of the sometimes madness that is the stock market.  You need at least part of your portfolio to be something conservative that holds value and grows free of stocks. 

That part of your portfolio should grow as your total assets get larger and you get older. Starting with 5% in precious metals makes sense early on, but you might to grow that to 15% later on as you get closer to retirement.

How Do You Get Started?


If you want to do a gold IRA rollover, then there are five steps to the process:

  • Choose How Much Gold You'd Like to Own

While gold prices usually go up over time, you need to consider your investment in it more as risk management than speculation.

Gold should help your portfolio against inflation, but what if deflation happens? This asset would decrease in value.

  • Pick Your Gold IRA Broker

You can't do a gold IRA by yourself. The IRS requires that you choose a broker, so look into your options and see what their fees and history are. Their relationships with depositories and custodians will also matter a great deal.

  • Fund the Account

Your gold IRA is something you can fund just like any other IRA. You can do it using cash, but you can also do it with stocks, bonds, and other investments. A check or bank wire transfer is often the most common choice, however.

  • Choose Your Bullion

You'll need to buy bullion, coins, bars, or a combination thereof, but you'll have two limitations. First, you can only buy things that the IRS approves of. Second, you'll be restricted to what your broker has available for sale at the time.

  • Direct Your Broker

Once you know what specific precious metal products you want, let your gold IRA broker know. They'll use the rollover funds to buy the physical assets on your behalf.

Then, they'll move them to secure storage where they will hopefully grow in value over the years.

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