Gold IRA Rollover – Gold 401K Rollover
A gold IRA is a type of long-term retirement account. A custodian is required to hold precious metals for the account owner. Gold IRA plans are typically self-directed IRAs. They allow more diverse investments than a traditional IRA. Traditional IRA and 401k accounts can be converted through a process known as a Gold IRA Rollover.
Self Directed IRA
A self directed IRA allows alternative investments for retirement savings. The trustee/custodian provides custody of the assets, processes all transactions, maintains other records pertaining to them, and files required IRS reports.
The account owner chooses among the investment options allowed by the IRA custodian. For regular IRAs these options usually only include stocks, bonds, and mutual funds. With self-directed IRAs, a significantly broader range of alternative investments are available to the account owner. It gives you the ability to hold gold bullion coins and bars inside the actual account, and to buy them with tax deferred money.
Although “gold IRA” is the most common name, that doesn’t mean you can only purchase gold with the plan. You can also hold certain types of silver, platinum and palladium. One important thing to note: you can’t simply collect anything made of those four materials. The IRS has a list of specific items and fineness requirements. All precious metals must satisfy these specifications before you can have them in your gold IRA. For more information on gold and silver IRAs, click here.
Setting Up a Self Directed IRA
The process of opening a self directed IRA is fairly straightforward. First, you need to select an IRS approved custodian. Internal Revenue Service (IRS) regulations require that a qualified trustee, or custodian, hold IRA assets on behalf of the IRA owner. It is illegal for you to keep your investments yourself. You need a custodian to hold the gold you purchase through your IRA.
You also need a broker or metal dealer to sell you the gold. Often, the custodian will have a list of recommended brokers that can help you start your research. When you’ve found a custodian and a broker you’re satisfied with, you can open your account and purchase your precious metals.
Gold IRA rollover – Converting a Traditional IRA or 401(k)
Once you’ve opened your self directed gold IRA, you can contact the company managing your traditional IRA or 401(k) account. To begin the rollover process, you must choose between a direct or an indirect rollover.
- Indirect Rollover – You withdraw the funds from one account and then deposit them in another. With an indirect rollover, you have 60 days from the date you receive the funds to transfer the money to your custodian or gold IRA company. The funds become a taxable withdrawal if you don’t complete the transfer in the 60 day period
- Direct IRA rollover – The funds move directly from one account to another. The direct option is usually much simpler, and it comes with less risk of IRS penalties.
With either rollover option, you also have to make sure you’ve satisfied any special requirements your existing IRA administrator might have for rollovers. Once you’ve met the requirements, the company will send a check with your funds to either you or your gold IRA custodian. At that point, you have completed your 401(k) to gold IRA rollover.
Gold IRA Pros and Cons
There are many advantages converting a traditional retirement account to a self directed gold IRA…
Greater Amount of Control Over Your Retirement Accounts
Gold IRAs are “self-directed IRAs”. This gives you the ability to choose other approved investments besides physical gold coins, gold bars, and precious metals. If properly structured, you can include businesses, real estate, franchises, and other types of investments that just are not possible to include in a traditional IRA or 401k plan.
However, there are some other things to consider…
Fees and Storage Issues
You can not hold the gold from your Gold IRA at home. You must follow the strict rules laid out by the IRS regarding custodians and storage of the metals. Typically, the custodian handles all aspects of acquisition of your precious metals. This includes purchasing them, shipping them, transporting them, and storing them. There are yearly administration fees and storage fees that can easily run from $250 to $500 every year. You will have to overcome these fees through gold price appreciation so that your holdings can gain in value or at least break even.
Gold Pays no Interest or Dividends
Physical gold holdings do not pay interest, dividends, royalties etc. Any positive returns you can make can only come from rising gold prices. Historically, gold has handsomely held its value. But it is important to understand that it can undergo significant corrections from time to time.
Restrictions in Funding Your Gold IRA
IRS restrictions prohibit you from using any precious metals you already own to fund your Gold IRA. You also cannot buy them directly and send them to your IRA administrator. The custodian has to buy them on your behalf. You are strictly limited to the types of gold coins and bars that you can purchase following IRS rules. If you violate these funding and purchasing rules, then there will be penalties and taxes to pay.
Potential for Fraud
In theory, it is possible for a vault or custodian to defraud you. Let’s face it, it is difficult to go to a vault and physically inspect your holdings. It is not common, but possibilities of fraud do exist. This causes worry to some investors when they can not directly monitor their gold holdings. Even though the IRS publishes a list of approved custodians, they make no guarantees regarding any of the trustees that are included on that list.
Gold ETF Funds
Are you interested in holding gold through and exchange traded fund? Check out Gold ETF Funds here…