How to Hold Physical Gold in an IRA
Gold investments can provide an effective means of diversifying your retirement account and protecting against inflation.
However, you must understand the rules regarding physical gold investments within an IRA. There are specific regulations regarding what precious metals you can hold within it as well as how these assets must be stored.
1. Open a Self-Directed IRA
Experienced investors understand the importance of diversifying with precious metals as a hedge against inflation and global financial turmoil, yet Traditional and Roth IRAs don’t permit this investment option. Luckily, self-directed IRAs allow you to invest in any asset of your choosing – including precious metals!
Self-directed IRAs enable you to maintain checkbook control of your assets, which makes them ideal for those looking to expand beyond stocks and mutual funds in their retirement investments. A self-directed IRA can be set up either as a traditional pre-tax IRA, Roth IRA or even SEP IRA for small business owners.
To purchase and hold physical gold in your IRA, it’s necessary to find a custodian who supports this type of investment. They will handle all administrative duties while adhering to IRS guidelines, helping you select an IRS-approved depository and help manage the investment itself – they won’t allow taking possession of precious metals as this would constitute a prohibited transaction.
2. Find a Custodian
Custodians are essential components of any retirement account, and finding one suitable to house physical gold investments is especially critical for those aiming to diversify. Traditional custodians such as banks and brokerage firms provide safe, straightforward investing options while self-directed custodians allow more control over which investments you make in your IRA.
No matter if you opt for traditional or self-directed custodianship, investing in gold for an IRA requires certain fees that should be anticipated from dealers, custodians and depository holdings that offer their services.
Gold IRA fees can be considerable, so it is vital that investors fully comprehend these charges prior to making a purchase. When selecting a custodian, look for one with years of experience, low to moderate fees, responsive customer service and knowledge of IRS-approved depositories for safe storage of gold.
3. Select a Precious Metals Dealer
To store physical gold in an IRA, a special type of account called a precious metals IRA (or “Gold IRA”) must be established. As it’s self-directed and allows greater control over investments, this account requires its own custodian since IRS has very specific rules about which assets you can hold and how they must be stored.
Your IRA custodian must then select an authorized dealer who can purchase and store precious metals you intend to invest in. When choosing an authorized dealer it is essential that they offer low or moderate fees with responsive customer service and possess plenty of experience.
Precious metals IRAs offer another way to diversify your retirement portfolio and protect against dollar devaluation, but before investing, be sure to gather as much information about tax benefits, risks, rollover options and rollover strategies as possible before investing.
4. Purchase Gold
Gold has long been considered an attractive form of savings and inflation protection, prompting many Americans to add physical precious metals such as gold or platinum IRA investments into their retirement portfolios. But IRA investments in physical precious metals may not always be straightforward.
Investors should remember that self-directed precious metal IRAs follow all of the same rules as traditional pre-tax or Roth IRAs, including contribution limits, penalties for early withdrawal and required minimum distributions at age 72. Furthermore, precious metals do not pay dividends or interest; investors must rely solely on price appreciation to generate returns on their investments.
Physical precious metals IRAs require additional work and incur higher fees than other retirement accounts due to all of the entities required to comply with IRS regulations, including precious metals dealers, custodians, and depository. Costs can mount quickly when taking in-kind distributions or opting for lump sum payment of metals.
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