How to Know If a Precious Metals IRA Is Right for You
Gold coins IRAs seem to be all the rage right now, but investing in precious metals is not a new concept. In fact, gold has been regarded as one of the most valuable elements on earth for thousands of years. In this modern era, when paper money is no longer backed by gold, experts note that gold has tended to be a solid investment choice, one that responds differently to volatile markets than other investment types. In fact, the value of gold often increases when traditional stocks are down, and decreases when they rebound. Having this diversity built into your investment portfolio may help protect your finances when the market is not in your favor. Before you decide whether a gold IRA is right for you, consider the following.
Do You Have the Freedom to Self-Direct Your Current IRA?
If you currently have a traditional IRA, you may not have the ability to self-direct your investments. Before you do anything else, check with your retirement plan administrator to find out whether or not you can self-direct. If so, you may be able to find a broker and custodian to work with you on setting up your gold IRA. However, if your current plan only allows traditional stocks, bonds and mutual funds, you will need to roll over to a new, self-directed plan. To do this, follow the instructions of your current plan administrator. Usually, the process starts with you finding a new trustee and initiating a rollover from your old plan. You sign some papers authorizing the move, and your old trustee sends relevant information to your new plan administrator. Once the new plan is established and funded, you can purchase gold coins for your IRA through a broker and select a custodian to maintain physical control over your gold until you are ready to withdraw it. A good starting place when researching brokers and custodians is the Better Business Bureau.
Familiarize Yourself With Relevant Rules
The IRS strictly regulates tangible property that can be included in an IRA. For example, collectible coins, stamps and antiques are not permitted. However, certain gold coins minted in the United States are allowed, including the gold American Eagle coin and one-ounce silver coins. Because the types of coins and bars allowed in a gold coins IRA are regulated by the IRS and are considered legal tender, you must designate an adequately insured custodian to hold your precious metals for you. In other words, you cannot store your IRA-related gold coins in a safe in your home. This also means that you must pay any applicable early withdrawal penalties, just as you would with a traditional IRA, as well as taxes on withdrawals.
Understand Your Upfront Costs
Vendors may charge more than the going rate for gold, and this is standard practice. For one thing, even the United States Mint charges more for gold coins than their standard metal weight would call for. This is because minting and shipping coins involves costs above and beyond the value of the metal itself. You should understand the normal fluctuations in the price of gold as a commodity, as well as standard upcharges in the industry so that you can decide what percentage constitutes an acceptable markup. In addition to settling on an acceptable cost for the gold coins themselves, you should do your part to make sure the vendor you are dealing with is dealing in physical precious metals, not in gold stocks or certificates.
You can expect the trustee of your new self-directed IRA to charge you ongoing fees for administrative tasks related to keeping your account up and running, including filing relevant reports with the federal government. Knowing in advance what these charges are will help you to make a logical choice of trustee and inform your annual budget. You can also expect the custodian of the physical gold to charge you ongoing storage fees.
Only Work With Reputable Organizations
Here is where your Better Business Bureau research comes in handy. The BBB is the best place to start when searching for a reliable gold broker. Check for BBB accreditation as well as an official rating, and find out how many complaints, if any, have recently been filed against the company. You can also search for government actions against the company through the BBB website. You may want to check customer review sites, such as Yelp, if the company you are considering dealing with has a listing. Another thing to examine is a company’s transparency. Read the fine print and try to find out about hidden fees before you sign anything.
Your metals vendor may be able to recommend a well-established IRA trustee, and vice-versa. Remember, if your existing retirement account allows you to direct your own investments, you may be able to add gold to your portfolio without finding a new trustee. In that case, you may still need to do research to find the perfect vendor and custodian for your needs.
Remember the Risks
No investment is guaranteed. The consensus about gold is that it is a long-term investment, not something to be bought, sold and traded on a whim. Like any other tangible asset, the gold coins in your IRA could presumably be stolen, so take precautions and verify that your chosen custodian has adequate insurance to cover a loss due to theft. Remember, the best way to look at a self-directed IRA of gold coins is as a means of diversifying, not replacing, your existing portfolio. Your traditional assets, such as stocks and bonds, and your tangible precious metals should complement each other and help you weather an economic storm.
A gold-backed IRA is a good idea in this day and age. You never know what the stock market is going to do, or when the next big banking crash is going to happen. Gold tends to retain at least some of its value even when other currencies are quickly succumbing to inflation. Gold coins have the added advantage of being accepted as currency almost everywhere in the world, no matter how much any national currency may devalue. Regal Assets can make your rollover to a gold IRA quick and painless. Take a look at their services today.