You can attain many benefits when you invest in gold and precious metals – especially with the tax advantages of investing in an IRA or retirement account.
For instance, one way to invest in gold through your 401(k) or other employer-sponsored retirement plan is through mutual funds and/or exchange traded funds that hold gold. You may also be able to purchase gold mining stocks.
In this case, you could review the description of the mutual funds that are available in your 401(k) plan. It is possible that some of these funds provide exposure to gold because they hold the stocks of gold mining and other related entitles.
You may also find that there are ETFs (exchange traded funds) that hold actual gold bullion and/or shares of gold mining and other gold and precious metals-related companies available in your retirement plan.
You could roll over your funds from an employer-sponsored retirement account into a personal self-directed gold IRA account. This, too, could provide you with greater access to gold and precious metals investing in a tax-advantaged manner.
But, while you may be able to buy gold mutual funds, gold miner stocks, or gold ETFs in a regular IRA or 401(k), the safest option is physical gold. You will need to take some additional steps to purchase that.
Items You’ll Need Before You Open an Account
With the vast reach of the Internet, it has become much easier and faster for investors to get a gold IRA account up and running. You just need to complete an account application and sign an IRA customer account agreement. You can usually find these forms online and/or available to download from the IRA companies’ websites.
You usually must provide the following information:
- Address / Phone Number / Contact Information
- Type of IRA account (such as traditional, Roth, or SEP plan)
- Social Security Number
- Beneficiary Designation (including the beneficiary / beneficiaries’ date of birth, Social Security, relationship to you, share of the account to receive, and if he or she is a primary or a contingent beneficiary)
- Marital status
- Contribution information and amount
- Method for paying the IRA setup fee and any annual account management fees
If you plan to transfer or roll funds over from an existing IRA or retirement account, you will also have to complete and return an account transfer form, along with a recent statement from your current IRA account custodian.
If you are making a cash contribution to the new IRA account, you can mail a check to the IRA company. Many gold IRA companies will also accept contributions that are made with a credit card.
Gold IRA Account Checklist
When you open and fund a gold IRA account, it can be helpful if you have a checklist in hand so that no you don’t leave any information out. With a self-directed gold and precious metals IRA, you will need to complete the following steps:
_ Determine which IRA companies and custodians best fit your specific investment needs and offer the gold and other precious metals that you want to invest in.
_ Determine who you would like to have as your IRA’s beneficiary (or beneficiaries).
_ Open an account by completing and sending in the IRA application form and other required paperwork.
_ Fund your gold IRA account with a cash deposit, IRA transfer, retirement plan rollover, or a combination of any or all of these.
_ Select the gold and/or other precious metals that may best fit your short- and long-term investment objectives.
_ Regularly monitor your gold IRA account to determine how it is performing, and whether any changes need to be made.
How Much Money Can You Contribute to a Gold IRA or Retirement Account?
The amount of money you may contribute to a gold IRA account depends on where that money is coming from. For example, the IRS mandates annual maximum contributions for IRA accounts.
So, if you are making a direct cash deposit into a self-directed gold IRA, you may contribute up to $6,000 (in 2020) if you are age 49 and younger, and a total of $7,000 if you are age 50 or older.
If you are funding a gold IRA with money from an existing IRA account and/or a 401(k) or other retirement account rollover, there is no maximum dollar amount.
It is important that you follow the contribution requirements of the gold IRA company. So, unless you transfer funds from a current IRA or retirement plan into the gold account, you may not be eligible to invest with companies that have a higher account minimum.
Steps for Opening a Gold IRA
There are several key steps that are necessary to take when opening a gold IRA. These include:
- Researching gold IRA companies / custodians
- Checking the products that the gold IRA companies / custodians offer (and ensuring that the IRS allows the products in a gold IRA account)
- Reviewing the types and amounts of any charges and fees you may incur
- Inquiring as to who actually owns the gold in the company’s vault
- Getting an idea of the company’s efficiency and customer service
- Checking to see how much – if any – education about gold and precious metals investing the company provides
- Reviewing testimonials about the company’s customer service and its customer service representatives (You could do a “trial run” by contacting the company through phone or email and asking them some questions).
- Reading the customer reviews and testimonials about other areas of the company, such as the investments they offer, how easy it is to open an account, and the way you can purchase the metals)
- Checking the company’s Better Business Bureau grade and compliant history
When you are researching gold IRA companies, you need to keep some other factors in mind. First, while there are many companies that offer gold IRA accounts, not all the companies are IRA custodians.
So, in some cases, the gold IRA company may not have storage facilities on-site for placing investors’ physical gold and other metals. You may want to narrow your search down to those gold IRA companies that also serve as an IRA custodian.
It is also important to determine what products the IRA company offers. When investing through a gold or precious metals IRA account, the IRS only allows certain types of metals.
So, while some companies may provide a nice selection of gold and other precious metals, the company has to offer some or all of the products that are approved by the IRS for investment in a gold IRA account. If not, you should choose a different provider.
You may be charged for other items, too, such as broker commissions and account maintenance fees. You will also have to pay a fee for the storage of your physical gold and other metals.
In this area, it is important to determine how the IRA company determines it storage fee. For instance, they may base it on the actual amount or value of your metals. Or, they may charge a flat fee on a monthly or a yearly basis.
So, make sure that you get a thorough comparison of several gold IRA companies’ fees, as well as the way they store physical gold. Even though this can take some time to do, it can be well worth it because you can eliminate the companies that might not be right for you and your investment goals.
So, be sure that you ask the company about whether it only offers gold IRA accounts, or if they also have true expertise in this specific area of investing.
This education can help you better understand what is and is not allowed in a gold IRA account. It could also show you how to determine which gold and other metals may be right for you, based on your particular goals and objectives.
A gold company’s customer service representatives are a key factor in attracting and retaining (or alternatively, turning away) customers and investors.
Generally, you can reach gold IRA customer service reps through a toll-free telephone number during market trading hours. Many companies also provide live customer service assistance through email and/or online chat services which you can access during and outside of market trading hours.
One of the best ways to “test” a company’s customer service representatives is to contact them and ask them a few simple questions. When you do so, be sure to take note of the rep’s knowledge and experience, as well as their helpfulness and courteousness when they are assisting you.
When you conduct this trial run, you may also establish which gold or other metals products – if any – the rep is trying to “sell” you. Also, you should ask the representative which products he or she would recommend – and why – based on your particular goals.
You can read what current and past customers of a company have to say – both good and bad – and get a better idea of how the company actually interacts with its clients, as well as how the products and services have performed.
- TrustLink – TrustLink provides reviews for home, personal, and professional services across many industries. These include financial, legal, real estate, mortgage, automotive, and home improvement. You can visit this website by going to: www.trustlink.org
- Better Business Bureau – The Better Business Bureau (BBB) is another great place to find information about gold IRA companies. On this website, you can learn more about any complaints filed, as well as whether or not the company has resolved the issue. The BBB also gives grades to companies – similar to a report card – from A+ to F. You can search for more details about gold and metals IRA companies per the Better Business Bureau by going to: www.bbb.org.
- Business Consumer Alliance – The Business Consumer Alliance (BCA) is a private, non-profit organization that promotes fairness and honesty in the marketplace. The BCA assists consumers with resolving complaints. They use that complaint information – such as customer reviews – to forecast business reliability. You can visit the Business Consumer Alliance website by going to: www.checkbca.org.
After you have narrowed down the gold IRA company (or companies) that are the best fit, you need to take a few more steps to open and fund an account. These include:
- Completing the necessary account paperwork.
- Funding the account.
- Selecting the investments.
Completing the Necessary Paperwork
Your first step is to fill out and submit the necessary application form and other required paperwork. Many gold IRA providers have the required forms available for download on their website. You may have to pay a one-time account application fee. Gold IRA application fees range from $30 to $100.
Funding the Account
There are actually several ways that you can fund your gold IRA account. These include making a(n):
- Direct cash contribution
- IRA transfer
- IRA and/or retirement account rollover
When you make a deposit into any type of IRA account, you must abide by the annual contribution limits that the IRS mandates. Each year, the Internal Revenue Service stipulates how much investors may contribute into IRA accounts. For investors who have more than one IRA, this is a total amount, not an amount per IRA account.
In 2020, the IRA contribution limit is $6,000 if you are age 49 or younger. Those who are age 50 and older may contribute an additional $1,000 for a total of $7,000.
If you already have an IRA account set up, you could transfer funds in that account to your new gold IRA. If you go this route, there is no annual dollar amount limit. So, even if you have a considerable amount in your current IRA, you can transfer it over to your new self-directed IRA.
If you move money from a traditional IRA over to a traditional self-directed IRA, you will have to pay tax on any gain. But, if you have a gold Roth IRA account, and you transfer funds to it from a traditional IRA, you will have to pay the taxes on any of the transferred funds that have not yet been subject to income tax.
Doing so could still work out to be quite favorable, though. That’s because currently (in 2020), the top Federal income tax rate is 37%. This is low in comparison to the top Federal tax rate over the past 100 years or so.
Top Federal Income Tax Rates 1913 – 2020
Source: Inside Gov (http://federal-tax-rates.insidegov.com/)
In return for paying taxes now on the account transfer, the money that you take out of the Roth IRA in the future will be tax-free. So, if income tax rates rise – which they are likely to do – it won’t have an impact on your Roth IRA withdrawals. This can give you more spendable income in retirement.
You may also rollover funds from an employer-sponsored retirement plan, such as a 401(k), into a gold IRA. Funds that you roll over from a traditional 401(k) or other employer-sponsored retirement account to a traditional self-directed gold IRA do not count against the maximum annual contribution limits. So, this is another way that you could add a significant amount of money into your gold IRA account.
Process of buying physical gold for your IRA and/or retirement account?
You first need to open a self-directed account that allows gold and other types of “non-traditional” investment vehicles.
You’re not allowed to invest in gold through a regular IRA account. So, you need to open a self-directed account. These accounts are not offered through most banks or traditional brokerage companies.
You will need to find a gold IRA company that can open a self-directed IRA account for you, and that can also provide you with investment options for the account like gold bars, gold coins, and other IRA-acceptable options.
The good news is that today, there are many IRA companies and custodians available in the marketplace. These companies specialize in working with investors who want to open a gold IRA account.
They can also assist you with rolling over a current IRA account – either in full or in part – to fund the new self-directed precious metals IRA. You can also find investor education through videos and/or printable reports on the companies’ websites.