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The Ultimate Guide to Gold IRA Retirement Plans
For most Americans, retirement savings plans are vital to achieving financial security in their golden years. While the more traditional 401(k) and IRA accounts have their place, investors are increasingly turning to gold IRAs as well. This guide will help you understand everything you need to know about gold IRAs, from what they are and why you should use them to how to actually start one of your own. Gold IRA retirement plan.
What is a Gold IRA Retirement Plan
Starting a gold-based retirement plan is a great way to diversify your retirement portfolio with precious metals. Here’s what you need to know about Gold IRAs and how they work. Gold is currently available in a wide variety of different forms, from bullion coins and jewelry, to certificates and futures contracts, each with their own unique pros and cons. This post outlines everything you need to know before deciding how best to use gold in your retirement portfolio.
There are two main types of IRAs, traditional and Roth. The tax laws governing both have been altered numerous times in recent years, but what has remained constant is that any earnings you make on investments held within your retirement plan are not taxed until they are withdrawn. Furthermore, all contributions (not including rollovers) come with an upfront tax deduction. Another thing to note is that neither a traditional nor a Roth IRA can be used for housing or education purposes; these are retirement accounts, so it’s best not to try using them for anything else!
How Do Gold IRAs Work? There are two main types of Gold IRAs – one which is backed by physical gold, and another that is based on a futures contract. Both allow you to invest in and benefit from precious metals, but it’s important to understand their specific pros and cons before deciding on one. Here’s a breakdown of each:
Gold-Backed IRAs: In these plans, gold actually makes up part of your investment portfolio. So if you have $100,000 worth of gold sitting around at home, $10k could be placed into an IRA account (assuming other investment requirements are met). This type of account is only available with gold bullion coins or bars; if you want to use an exchange-traded fund (ETF) or certificate instead, there will need to be some actual metal present somewhere.
Futures-Backed IRAs: This is a more flexible option, as it doesn’t actually require you to own any physical gold. In fact, in most cases your account will be backed by paper contracts that track gold’s performance on futures markets. That means if you want to take advantage of current market conditions, but can’t afford physical gold right now, using an ETF or certificate can be a viable alternative.
How Much Can I Invest in a Gold IRA? There are two main types of gold IRAs, depending on how you plan to store your gold. Each has its own set of rules that apply and limits regarding how much you can invest. Overall, there are no limits for either type (other than those applying to all IRAs), meaning that even if your retirement account is worth millions, you can still add gold as an investment vehicle.
Here’s what you need to know:
Gold-Backed IRAs: In a gold-backed IRA, there are limits regarding how much physical gold you can have at any given time. This means that if you want to invest $500k in an account, but only have $100k worth of metal available at home, your investment is capped at $100k. On top of that, under current IRS laws (subject to change) it’s not possible for anyone over age 70 1⁄2 to purchase gold directly from their retirement account; instead they must use trustee-to-trustee transfers with approved dealers.
Futures-Backed IRAs: These accounts don’t actually hold physical gold at all; instead they invest in futures contracts that track its performance on futures markets.
Advantages of Gold IRAs
The main advantage of a gold IRA is that you can use it as an investment vehicle. Since they are retirement accounts, they offer tax-deferred growth. Your money grows without having to pay taxes on it until you withdraw it in retirement. A traditional 401(k) also allows for tax-deferred growth, but only up to $18,000 per year.
Unlike gold coins or bars, you can’t sell your gold in an IRA for cash. Instead, you must take possession of it. This means that your holdings will be stored with a depository like Brinks, who will issue certificates as proof of ownership. You can withdraw them at any time and store them in a safe deposit box if necessary.
You can purchase coins and bars of gold in order to diversify your holdings. You can store all of them in a depository or store some elsewhere. If you want, you can hold different types of gold, such as gold coins and bullion. That way, you’ll be able to offset potential losses with gains in other types of investments.
Gold can be an ideal addition to your portfolio if you are concerned about potential inflation. The price of gold increases as inflation rises, and it usually holds steady in value even during periods of deflation. This makes it a great hedge against market downturns. It’s also easy to transfer your gold between accounts and safe deposit boxes in case you need quick access to it at some point.
Obtaining a Gold IRA Retirement Plan
Before you can start a gold IRA, you’ll need to open an account with a custodian. Although there are many different types of IRA accounts available (i.e., traditional, Roth, SIMPLE), in general, they all offer similar tax benefits. Just be sure to read up on your state and federal regulations before choosing an account. If you already have a 401(k) or other type of retirement plan through work, it is likely that gold coins won’t be permitted; however, if that’s not true for you then more power to you! Depending on which company is acting as your custodian for your gold IRA (or other type of retirement plan), follow their instructions for starting your account.
Once you’ve chosen a custodian, an account should be set up within days or weeks. Once your account is open, you will then need to buy gold coins or bullion. A good rule of thumb is that you want at least 20% of your retirement plan in gold and precious metals.
Your custodian will have a list of approved gold sellers.
Choose one and make an account with them, then transfer funds into your new account at your custodian. Once they receive those funds, they’ll purchase your gold coins and bullion on your behalf and store them in a secure vault on their property. That’s it! Now you’re ready to add gold coins or bullion as investments in your retirement plan, as well as reap all of their other financial benefits.
There’s no obligation to hold your gold for a certain period of time, so if you want, you can sell any or all of your investment whenever you like. And because gold is classified as a collectible by the IRS, there are no capital gains taxes due when you make a profit. However, if you use your gold for transactions (buying and selling goods or services), those sales will be subject to income tax just like anything else. Additionally, once your gold reaches its ten-year anniversary of being stored in a custodian’s vault, it automatically receives status as long-term capital gain property; that means you won’t have to pay income tax on any profits made from selling it at that point forward.
Trading Precious Metals in an Account
This type of account allows you to buy and sell precious metals and place them in an individual retirement account, which is a tax-deferred way of saving for retirement. The account can be set up as either a traditional or Roth-style. Both traditional and Roth IRAs are tax-deferred accounts, meaning that all gains are not taxed until you begin withdrawing funds from your plan. The main difference between these two types of accounts lies in when you pay taxes on withdrawals.
As of 2015, you can hold gold, silver, platinum and palladium in an individual retirement account. Like with other investments held in an IRA, profits on precious metals are not taxed until they are withdrawn from your account. However, precious metals held in an IRA do carry higher premiums than those traded outside of a retirement plan.
The IRS requires a minimum investment of $5,000 when you open a precious metals IRA. This amount is subject to change without notice. All investments made in your account will have to be rolled over individually by check or wire transfer from another financial institution. In most cases, your holdings are insured up to $250,000 by either the FDIC or SIPC (depending on which bank holds your account). Both traditional and Roth IRAs can hold more than one type of metal; however, you can only purchase bullion directly from a company that holds an LBMA Good Delivery status for gold and silver bars.
With all of these benefits, it’s easy to see why so many investors are choosing to place their precious metals investments in an IRA. However, there are also some disadvantages associated with investing in a retirement plan, such as higher premiums and specific requirements regarding how your holdings must be transferred into your account. Furthermore, if you hold multiple precious metals accounts outside of a retirement plan that value total more than $100,000 you may be required to file form 3520 with your federal tax return each year.