A gold backed IRA is just like any other individual retirement account in the form of a self-directed IRA. The difference lies in what your IRA is invested in. The Employment Retirement Income Security Act of 1974 (ERISA) allowed the formation of the Individual Retirement Account and with it, the Self-Directed IRA. Just like an IRA, you can open an account and make the allowable annual contributions, or you can roll over or transfer from an existing retirement account. A gold backed IRA allows you the option to use existing retirement funds to invest in physical gold, silver, platinum, and palladium.
If you are the owner of an individual retirement account (IRA) and are worried about economic inflation affecting the value of your assets, investing in precious metals may be a good long-term choice. Precious metals are time-tested and proven to be a solid investment in a volatile market because the price of precious metals tends to rise when the stock market is down. Including precious metals products in your account will ensure diversification so when the next recession hits, your retirement portfolio is safe.
As we saw in 2008, Wall Street is unpredictable! We need some “insurance” in our retirement portfolios to protect our hard earned savings. The time-tested stability of gold and other precious metals makes a physical gold IRA an appealing addition to your retirement portfolio, and yes, you can add certain types of gold to your individual retirement account. In addition to the protection that gold and other precious metals offer, the self-directed IRA allows you to be in control of your retirement. The drawback of many employer-sponsored plans is that you are at the mercy of the funds that your employer chooses. You may also have no protection against future loss. The good news is that there is an easy fix for both of these situations.
How to invest in Gold?
In a gold based IRA, you have the opportunity to buy gold and other precious metals. This is important because gold provides you with the growth potential and insurance against future losses that other types of investments in your retirement accounts don’t offer. The price of gold, unlike traditional stocks and mutual funds, tends to increase in value in the face of economic adversity and volatility. This means that when traditional paper-backed investments lose value, the gold in your account generally increases in value, acting as a hedge of your retirement portfolio. Gold also has the ability to increase in value when markets are good, ensuring that your savings reach their maximum earnings potential.
Why Invest in Gold?
What do you expect life to be like when you retire? Have you been thinking about your retirement savings strategy and wondering how you could improve it? If so, you aren’t alone. Many people, especially those hardest hit by the Great Recession of the last decade are finding themselves wondering whether their current retirement strategy is strong enough to make up for their losses in 2008 as well as protect themselves from future losses.
The truth is that if you are invested in a Traditional or Roth IRA or a company-sponsored plan such as a 401(k), you may not be aware of some weaknesses that are common among all of these paper backed investments. These paper backed investments are based on the value of money. The value of money can be measured by buying power and exchange rate. Buying power is the amount of goods or services that are exchanged for your money. The exchange rate is the value of your currency versus another currency. Since the United States went off the Gold Standard, the dollar has become weaker and weaker in terms of buying power. This affects your daily life because if the value of the dollar decreases, gas prices go up, food prices go up, and your dollar does not go as far as it did before. History has shown that gold tends to rise with inflation, meaning that the gold that you own can still be exchanged for the same amount of goods and services year in and year out. While the US government continues to print more money, you cannot print more of a finite metal.
In addition to its use as an investment channel, gold has many practical uses that drive its demand. The jewelry industry makes up more than 50% of the global demand for gold, and with global populations at an all-time high, demand will continue to rise.
Gold is used in:
- gaming consoles
- solar panels
- and much more
Silver – The number one use of silver is in electronics. It’s thermal and electronic conductivity make it an ideal metal for industrial applications that cannot be substituted with cheaper metals. Silver is used in computers, tablets, cell phones, televisions, automotive parts, solar panels, and much more. Silver coins are highly sought out by many collectors and investors. Learn more about starting a Silver IRA.
Platinum – Platinum is an industrial metal that is primarily used in automotive applications for catalytic converters to help reduce harmful emissions. It is also used in jewelry, and other refining catalysts and some computer applications. It is actually rarer than gold and silver.
Palladium – Palladium is 15 times more rare than platinum and 30 times more rare than gold. It is used in automobile manufacturing, electronics, dentistry, and fuel cell production. Similar to platinum, palladium is primarily used in automotive catalytic converters.
Because physical precious metals all have industrial and commercial uses, their value is not only based on exchange rate, but also supply and demand. With a finite supply and an increasing demand, their value will continue to rise.
Analysts estimate that by 2020 there will be 6.1 billion smartphone users in the world. The explosion of technology in the 21st century has led to an ever-increasing demand for the conductive metal. As gold mining and production have become increasingly difficult, the realization that the global supply of the metal is dwindling means that the price of gold will continue to rise as we get further and further into the information era.
What Metals Can I Put in My IRA?
Although you may be keen to get in touch with precious metals brokers and start investing in products that will bulk up your precious metals IRA, it is essential that you read the IRA standards and guidelines beforehand. The following things may be assessed by the IRS when determining what products meet the precious metals IRA rules:
- Level of Purity – The precious metals in your IRA must meet a minimum fineness as stated by the IRS:
- Gold – .995
- Silver – .999
- Platinum – .9995
- Palladium – .9995
- Place of issue, e.g. Royal U.S. Mint
- The precious metals you place in your IRA must be held in the custody of an IRS approved custodian until you reach retirement age. Once you reach retirement age at 59 1/2, you can begin taking distributions either in the form of physical precious metals or you can sell them back at market price.
Do you still have questions? If so, speak with one of the gold and silver investment experts at Goldco.
It is important to mention that because gold is a physical asset, you might think that you can store your gold at home in your own safe. Unfortunately, this isn’t the case. The precious metals you add to your Individual Retirement Account must be held in the custody of an IRS approved custodian that is in charge of administering your IRA and stored in a licensed, insured depository. If you would like to purchase gold coins for your own collection, check out our coin shop for our full selection. Keep in mind that you won’t be able to use tax-deferred retirement funds to purchase gold if the gold is shipped to you.
Goldco offers a wide range of gold products that are approved by the IRS for inclusion. Some of our more popular options include:
1/4 oz UK Gold Lunar Year of the Rooster (A Goldco Exclusive Coin)
1/4 oz Gold Australian Saltwater Crocodile. (A Goldco Exclusive Coin)
Both of these products meet the stringent fineness test for inclusion. See the full list of IRA Approved Gold Coins.
As mentioned previously, silver, platinum and palladium products are also eligible. Goldco offers an array of platinum products that meet IRS requirements including the Platinum Canadian Maple Leaf Coin and various palladium bars and coins. Questions concerning which investments are the right ones for your needs can be answered by your Goldco IRA representative.
As mentioned previously, gold IRAs offer several benefits over other types of retirement accounts. These include offering protection against loss for your retirement account balance as well as allowing you to grow your account balance no matter what the financial markets are doing. Investing in gold and other precious metals provides a more inherently stable investment option and also provides diversification to your retirement account so you’re holding more than just traditional investments like stocks and mutual funds. This is because while the price of gold does fluctuate, it does so with much less volatility than paper backed securities.
Thinking that gold might be a perfect choice for your retirement savings needs? Great. The first thing that you need to do is open your account. Opening an account is an easy process that doesn’t require you to spend any money out of your own pocket, as long as you already have an employer-sponsored retirement plan:
- The first step is to contact Goldco today and start the process. If you need additional investment advice, fill out our form on the right-hand side of the page to have one of our representatives contact you, or call us at (855) 465-3472.
- Once you are ready, together, we will complete the documents to set up your account and transfer or rollover funds from your existing IRA, 401k, or other employer sponsored plan to open the account.
- The next step is to send back your completed paperwork and let Goldco go to work for you.
- We will open your Self-Directed Individual Retirement Account and process the necessary documents to transfer the funds to your existing account without having to worry about paying taxes or early withdrawal penalties. Once your account is open, your representative will then be able to help you make informed decisions regarding the precious metals you should invest in. The entire process usually takes about 2-3 weeks.
Frequently Asked Questions
Why do I need a custodian for my IRA?
Every self directed IRA requires the use of IRA custodians as stated by the IRS. If a company is offering you the ability to hold your precious metals at home and count towards your IRA, steer clear as this is not legal.
Is the gold in my IRA safe?
First of all, your gold is stored in a secure vault in an IRS approved depository (Delaware Depository). Your gold is also insured by Lloyd’s of London in case anything does happen. Speak with your Account Executive for any questions about where your gold is stored and how it is protected.
When and how can I take distributions from my precious metals IRA?
At the age of 59 1/2, the beneficiary can start taking distributions from their account. This can be in the form of physical precious metals, or you can sell it back to us or on the free market. The same taxation rules apply as they do for other types of retirement accounts, depending on the type of IRA (Roth vs. Traditional). Consult with your Account Executive for more questions.
Rollover – The process of moving assets from an employer-sponsored retirement account (such as a 401(k) or 403(b)) to an IRA. There are specific rules for direct rollovers (trustee to trustee) and indirect rollovers (liquidated account). See our 401(k) rollover page for more details.
Transfer – IRA to IRA movement of retirement funds.
Gold Spot Price – Current price of gold.
Custodian – A financial institution that hold’s an individual’s assets/securities for safekeeping as required by the IRS. They are authorized to act on behalf of the individual.
Depository – Where your gold or precious metals are stored.