An individual retirement account (IRA) that offers precious metals investment options allows you to diversify your retirement portfolio without incurring capital gains taxes. By buying precious metals that meet IRS guidelines, an IRA enables you to purchase precious metals tax-free.
However, these accounts come with their own set of fees and risks that should be carefully considered when selecting one. To reduce costs effectively, look for companies with low annual fees and reasonable storage charges.
Investing in Precious Metals
Gold can be purchased through self-directed IRA custodians and purchased either as bullion or coins. When selecting an IRA provider for gold purchases, transparency and competitive pricing should be top priorities; you also want a company with excellent customer service that doesn’t charge additional fees should also be considered.
Gold IRAs can be established through either traditional or Roth accounts, with contributions being tax-deductible and distributions tax-free in retirement. Since physical metals don’t trade like stocks do, make sure the custodian you select provides safe storage and insurance for them before investing them into an IRA. Remember to withdraw property prior to age 59 1/2; withdrawing early will incur taxes as well as an early withdrawal penalty of 10% of any assets held; this doesn’t apply with Roth IRAs due to being funded with after-tax dollars like traditional and SEP accounts do.
Hedge Against Inflation
Gold IRAs can serve as an effective hedge against inflation due to its proven track record during periods of economic turmoil. Furthermore, unlike stocks and bonds which generate dividends, gold remains a long-term play with potential for higher returns over time.
Individuals investing in physical gold coins and bars through a self-directed retirement account (SDIRA), or indirectly via mutual funds, gold mining stocks, or exchange traded funds may find that gains are taxed as long-term capital gains.
When selecting a gold IRA company, look for those rated A by Better Business Bureau that provide transparent pricing and secure storage options. Such firms will usually offer competitive buy-back rates and impartial customer education while being free from hidden fees with an excellent track record in customer service and an IRS-approved depository option for storage options.
Tax-Free Rollovers
Gold IRAs, like other tax-sheltered retirement accounts, allow you to deduct contributions up to certain limits from your taxes. Before making any investment decisions or contributions to an IRA, however, it is wise to consult a fiduciary financial advisor whose legal obligation requires him or her to act in your best interests first.
In order to open a gold IRA, it’s necessary to work with an approved custodian that has established relationships with reliable precious metal dealers and possess physical gold that conforms with IRS fineness requirements.
Gold IRAs provide you with more flexibility than traditional and Roth IRAs when it comes to taking out minimum distributions at age 72; you can delay these withdrawals until later. Therefore, these accounts may be beneficial if you wish to hold onto other investments at unfavorable times without liquidating at once. However, be mindful that opening one does incur fees as well as ongoing storage and custodial costs.
Tax-Free Distributions
When investing in a gold IRA, it is essential that you understand its tax implications and fees associated with this self-directed account. Gold IRAs differ from mainstream IRAs in that they are self-directed; you must choose an authorized custodian and depository to hold precious metal assets securely for you; additionally, an expert dealer should specialize in gold and offer coins or bars which meet IRS fineness standards.
When selling gold held within your IRA, any profits are taxed as long-term capital gains. However, you must be ready for higher taxes when selling collectible coins that have only been held for less than one year; you’ll pay ordinary income taxes of 28 percent (Journal of Accountancy).
Add precious metals to a traditional retirement account for diversification, liquidity and income-generating potential. But before rolling over an existing 401(k), 457, pension or Thrift Savings Plan account into a gold IRA, carefully consider your investing goals, risk tolerance and time horizon before proceeding.
