Does owning a self-directed gold IRA offer more benefits than owning a regular IRA or 401k? Should you consider converting your investments (cash, bonds or stocks) to more stable assets such as gold silver, platinum or palladium?
The major difference between a gold IRA and a regular IRA is that a gold Ira is self-directed, meaning that you are not only limited to stocks or bonds like in the case of a regular one. Thus you can put gold or any other acceptable precious metal in a self-directed IRA for the purpose of diversifying your investment portfolio.
Keep in mind that precious metals, particularly gold, tend to appreciate when paper money depreciate and therefore is a great hedge against inflation.
Table of Contents
- 1 The Process of Setting up a Gold IRA
- 2 Should be Licensed
- 3 Should Have a Proven Track Record
- 4 Should be Transparent
- 5 Should Offer World-Class Storage Facilities
- 6 Should Offer Insurance
- 7 Fees Associated With Gold IRA
- 8 The Benefits of Gold IRA/401k Rollover
- 9 Hedge Against Inflation
- 10 Diversification of Investment Portfolio
- 11 Wealth Preservation
- 12 The Liquid Nature of Gold
- 13 Tax Benefits
- 14 Risks Associated With Gold Investment
- 15 Conclusion
The Process of Setting up a Gold IRA
Setting up a gold IRA is a simple procedure but you need to understand the basics to avoid any issues. The process involves finding an IRA broker who will guide you through the process of buying the physical commodity as well as transferring your funds to your new account. You will also require a custodian to store your investment on your behalf.
According to IRS, you cannot store the gold yourself hence the need to find a certified trustee or custodian to store it for you. There are numerous brokerage companies, banks and credit unions that specialize in this, but finding the best custodian is not easy.
Some of the qualities you should look for in a company before engaging them include:
Should be Licensed
Your chosen company should have all the required documents of operation i.e. should be legitimate and approved by federal or state agencies to operate. Your first step is to ascertain that they are legit.
Should Have a Proven Track Record
Find out what customers say about the company by looking at its profile on online platforms such as the Better Business Bureau, the Business Consumer Alliance, TrustLink and Ripoff Report. Make sure to choose a company that is reputable and has few or zero customer complaints.
Should be Transparent
They should be honest with all their operations especially their fee structure. They should let you know all the required fees before you begin transaction.
Should Offer World-Class Storage Facilities
Storage is one of the most important aspects of a gold IRA. The depository you chose should offer top-notch, segregated storage facilities lest you end up losing your assets to burglars and fraudsters.
Should Offer Insurance
This will cushion against losses should anything go south. Insuring your gold assets will protect you from fraudsters and thieves.
Some Gold IRA companies such as Goldco simplify the hectic procedure of converting paper assets to gold through their experienced account executives who handle everything on your behalf. They also possess all the aforementioned qualities and we highly recommend them for your investment. Setting up a gold IRA account with Goldco is as simple as filling out their online form and waiting for guidance from their account executives.
Fees Associated With Gold IRA
There are special costs you need to bear in mind while moving from a regular IRA/401k to Gold IRA. These include:
- Storage Costs- costs for storing your investment in a secure vault.
- Seller’s Markup-this the price charged above the normal price by the seller in order to make profit.
- Custodian Fees-includes administrative fees charged by the custodian.
- Setup Fees-Costs for setting up your self-directed IRA account.
- Cash-Out Costs-these are the costs associated with closing your IRA i.e. selling your gold investment. You can either sell it to a third party or to the company itself if they have a buyback program in place.
How to avoid the above Gold IRA special costs? The only way is to opt for a Checkbook IRA, which is a type of self-directed IRA that does not require a custodian to take care of it. However, a Checkbook IRA is not suitable for individuals as it has a lot of requirements, making it a complicated undertaking. For instance, to open a Checkbook IRA, you must have a business checking account and be a Limited Liability Company (LLC).
The Benefits of Gold IRA/401k Rollover
There are a number of reasons why converting paper assets to gold appeals to investors and retirees. Here are a few of them:
Hedge Against Inflation
As you might know, gold value tend to move in opposite direction to paper money, stocks or bonds. When the value of the banknote dwindles, the value of gold goes up, and vice-versa.
And when we look at the prices of gold from as far back as 1999, we can clearly see that gold price has been steadily rising, but with some ups and downs as well.
However, at no point will gold be worthless like paper money during hyperinflation. Thus, gold is by far the best hedge against inflation, and this explains why it has gained popularity as an alternative form of investment since the financial crisis of 2008.
Diversification of Investment Portfolio
By adding gold to your investment asset base, you are ensuring that your investment profile is diversified. Experts recommend rolling over at least 10% of your retirement savings to gold. This will surely insure your investment against economic downturns since gold is ever stable.
Again, the stability of gold makes it one of the best commodities for wealth preservation. The future of gold is also highly promising since its production has dwindled as compared to the past; hence gold prices are like to rise in the future, making it an awesome investment commodity for preserving your wealth.
The Liquid Nature of Gold
People love gold since it can be easily converted into money in case of emergency. Since it is always in high demand, you can easily sell it to dealers or the company storing it for you, provided they have a buyback program, which most companies do.
With a gold IRA, you will pay less tax than with a normal IRA/401k account.
Risks Associated With Gold Investment
Just like other forms of investment, investing in gold is not without risks. For instance, the price of gold can come down, but this is highly unlikely.
The biggest risk is falling for scammers who might steal your gold. Some untrustworthy companies are known to sell customers’ investment to third parties. Others have insecure storage facilities making your investment vulnerable to burglars.
To avoid these risks, you first need to find a trustworthy custodian. Make sure they have all the qualities we listed above, and more importantly ensure they have some form of insurance policy to mitigate these kinds of risks.
Gold IRAs are considered the best alternative forms of investments for diversifying an investment portfolio. Gold has been around for over 5000 years and has always remained a stable, highly valued commodity. And with the extraction of the yellow metal slowing down, we should expect its price to go up in the future.
Nevertheless, investing in gold comes with its ups and downs, just like any other form of investment. You need to consult a financial advisor and do your own thorough research before setting up a self-directed Gold IRA account.