How a Self-Directed IRA for Gold Works

self-directed IRA

Between high prices, the threat of recession, and continued weakness in the banking sector, the headwinds facing the economy seem to multiply by the day. It’s no wonder, then, that many Americans are looking to ways to protect their finances against the potential for loss that often accompanies recession.

With stocks and bonds both having lost money last year, many investors are looking to alternatives to help protect themselves. Whether that’s through real estate, cryptocurrencies, or precious metals like gold, Americans seem more open than ever to alternative investments. And one way they’re able to take advantage of those alternatives is through a self-directed IRA.

What Is a Self-Directed IRA?

A self-directed IRA is an individual retirement account (IRA) in which you decide what you want to invest in. While the IRA is administered by a custodian, just like any other IRA, with a self-directed IRA you are essentially the manager, determining what assets you want to own within that IRA.

Self-directed IRAs allow you to invest in a wide variety of alternative assets which normally you wouldn’t have access to in an IRA. That can make self-directed IRAs a powerful means of diversifying your investments and giving you real choice with what to do with your money.

What Can a Self-Directed IRA Invest In?

Self-directed IRAs can invest in numerous types of alternative investments, including real estate, private equity, and commodities. A self-directed IRA can invest in just about any type of asset except for those that are expressly prohibited by law. For the most part, that means that your self-directed IRA will not be able to purchase collectibles.

The Internal Revenue Code defines collectibles as including works of art, rugs, antiques, metals and gems, stamps and coins, alcoholic beverages, or anything else the Secretary of the Treasury determines to be a collectible.

There is an exception for metals and coins, however, namely that certain gold, silver, and platinum coins minted by the US Mint are not considered collectibles for purposes of IRA acquisition. These would be the Gold American Eagle, Silver American Eagle, and Platinum American Eagle coins.

Also, any gold, silver, platinum, or palladium bullion meeting or exceeding the minimum fineness for contract markets is also exempt from definition as a collectible for purposes of IRA acquisition. This means that gold, silver, platinum, or palladium bullion coins or bars can be purchased with IRA assets for your self-directed IRA.

Most mints around the world today are aware of these requirements for IRA eligibility, which is why many popular bullion coins today are minted with finenesses that make them IRA-eligible. Goldco works with mints around the world to bring you IRA-eligible coins so that you don’t have to worry about the gold coins you want to buy not being eligible for IRA investment.

Benefits of a Gold IRA

Gold IRAs are a popular self-directed IRA today, as they are an IRA that allows you to own physical gold coins or gold bars in a tax-advantaged retirement account. You may be wondering how a self-directed gold IRA can benefit you. Here are four of the benefits of having a gold IRA.

Tax Advantages

One of the foremost benefits of a gold IRA is the advantage you get from owning gold in a tax-advantaged account. You can fund a gold IRA with a tax-free rollover or transfer from an existing 401(k), 403(b), TSP, IRA, or similar retirement account and enjoy the same tax advantaged status in a gold IRA as you do with your current retirement accounts.

Your asset growth continues tax-free, and you only pay taxes when you decide to take a distribution or, in the case of a Roth gold IRA, you pay no taxes when you take a distribution. For a Traditional gold IRA, the taxes you pay on distributions are the same as the taxes you would pay on distributions from any other Traditional IRA. And depending on your particular financial situation, that could provide a benefit versus paying taxes on gold held outside a gold IRA.

Portfolio Diversification

An important aspect of gold ownership is the potential for portfolio diversification. There are plenty of investors who aren’t enthusiastic about gold but who still own it, because gold can provide diversification of their portfolios.

Different advocates of diversification will have different approaches to it, but in general, portfolio diversification is about trying to minimize risk or mitigate potential losses. Because gold often performs well when markets aren’t doing well, owning gold can potentially offset losses elsewhere in your portfolio.

Safe Haven Asset

Because of gold’s reputation for performing well during economic crises, it is trusted around the world as a safe haven asset. Even central banks maintain thousands of tonnes of gold as reserves, and they’re buying more all the time.

Gold has served as a store of wealth and a monetary metal for millennia, and it shows no signs of slowing down. When things look bleak and the world looks topsy turvy, gold remains one of the safe haven assets people turn towards.

Inflation Hedge

Because of gold’s ability to maintain its purchasing power over time, it has acquired a reputation as a hedge against inflation. Certainly when you consider the fact that the US dollar has lost 97% of its purchasing power since 1913 while the gold price has gained more than 9,000%, that seems to make sense.

During the 1970s, the gold price grew at an annualized rate of over 30% per year over the course of the decade. While inflation isn’t as high today as it was last year, we’re not necessarily out of the woods yet. And if the 2020s end up becoming a decade of stagflation like the 1970s were, many gold owners are hoping that gold can end up repeating that performance.

What Type of Gold Can a Gold IRA Own?

A gold IRA can own gold coins and bullion. Bullion can encompass gold coins, gold bars, and gold rounds. Pretty much any gold bullion product that is at least 99.5% pure gold is IRA-eligible.

What this means is that classic older coins like pre-1933 US gold coins, South African Krugerrands, or Austrian 100 Corona and 4 Ducat restrikes are not IRA-eligible. These are popular bullion coins with investors, but because their gold content is less than 99.5% gold, they are not allowed to be purchased with assets from your gold IRA.

Gold coins such as the Gold American Eagle, Canadian Gold Maple Leaf, and Austrian Philharmonic are IRA-eligible, as well as a wide array of gold coins from mints around the world. Goldco works with many mints around the world to bring a continuous stream of new gold coins with fresh designs to the marketplace to satisfy the growing demand for investment-grade gold coins.

Gold bars are also IRA-eligible, and can be had in sizes ranging from 1 gram up to 1 kilogram (1,000 grams), with many sizes in between. Gold rounds can also be IRA-eligible, although they’re less common to find than gold coins.

How Does a Gold IRA Work?

Whether you’re dead set on starting a gold IRA or still wondering how a gold IRA can benefit you, you probably want to know how a gold IRA actually works. Thankfully the process for starting a gold IRA is relatively simple.

Work With Trusted Partners

The first thing you want to do once you decide to start a gold IRA is to work with trusted partners. Like any other IRA, a gold IRA will require that your IRA assets are managed by an IRA custodian. But not every IRA custodian offers you the ability to start a self-directed IRA for gold.

Goldco works with established and reputable IRA custodians who offer custodial services for gold IRAs, to ensure that our customers are able to begin the process of opening a gold IRA without having to face insurmountable hurdles. Once you choose the custodian you want to administer your gold IRA, you can begin the process of starting your gold IRA and funding it.

Fund Your Gold IRA

There are numerous ways to fund a gold IRA, but one of the most popular is through a rollover or transfer of assets from existing retirement accounts. Rollovers or transfers from 401(k), 403(b), TSP, IRA, and similar accounts into a gold IRA can be made tax-free, allowing you to protect existing retirement assets with gold without having to take a tax hit.

These rollovers also are not subject to the annual IRA contribution limit, which is currently $6,500 per year. This allows you to fund a gold IRA with much more money than you would otherwise be able to with normal annual contributions, helping you to be able to buy much more gold.

Buy Gold for Your Gold IRA

Once your gold IRA is funded, it’s time to decide what kinds of gold you want to buy. Your choices are nearly endless, with dozens of different types of gold coins or gold bars to choose from.

One neat aspect of a gold IRA is that the gold you purchase is the same gold that will be stored at a bullion depository. The gold coins or gold bars you purchase are the same gold coins and gold bars that you’ll be able to take physical distribution of if you decide to take your IRA distributions in gold rather than in cash.

Because of the rising risk of fraud in the marketplace, it can help to work with trusted partners to ensure that the gold you buy is authentic. Goldco works with mints around the world to bring you 100% authentic gold coins. With over $2 billion in precious metals placements and over 5,000 5-star reviews from our customers, you can trust Goldco to deliver the gold you want.

Getting Started With a Gold IRA

If you think a gold IRA may be what you need to help protect your hard-earned money, now’s the time to start learning more. With the threat of recession waiting in the wings, you don’t have forever to plan for how to protect your money. And the sooner you plan to protect yourself, the sooner you can rest easy, knowing that you have a plan.

Gold has been trusted by many people over the years to protect their assets. Goldco alone has thousands of satisfied customers, and we work hard to provide our customers with the gold products they need. If you want to learn more about how a gold IRA can help safeguard your savings, call Goldco today.

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