Gold IRAs

THE ADVANTAGES OF INVESTING IN GOLD IRAS

The thought of investing in Gold IRAs is becoming increasingly attractive to large numbers of working people as the current economic problems show no sign of improving. Until quite recently, an Individual Retirement Account could be funded only with stocks, bonds or cash. But in 1997 Congress extended the rules to include precious metals, including gold. Now, more and more investors are taking advantage of this option as a safe haven from the turbulence of national and global markets.

There are many advantages of investing in Gold IRAs that you might want to consider. Gold has always been one of the most – if not the most, desired and sought after commodities in the world. But in the past decade, the surge in demand has been almost unprecedented thanks to the extreme volatility of global currencies and economies. This demand is not going to decrease, but the supply is likely to diminish as production becomes more difficult. With demand exceeding supply, the price is likely to keep rising.

On the other hand, the value of the dollar continues to fall. One great advantage of Gold IRAs over traditional IRAs is that the latter uses paper assets as its investment tool. For this reason, there is a big risk that a traditional IRA will not prove sufficient to fund your retirement, but gold accounts do not have this problem.

Gold Retains its Purchasing Power

Gold in fact is seen as a safer investment than virtually any other asset class at the present time. Bonds, mutual funds and stocks are all affected by the ongoing market instability, while historically the performance of gold has always been in inverse correlation to these other assets. In addition, gold is barely affected by inflation which can disastrously erode the value of a cash plan over a few decades. Gold in contrast, has retained its purchasing power not just over decades, but over thousands of years.

Apart from the value of the gold itself, Gold IRAs are surrounded by a lot less bureaucracy than conventional IRAs and are thus much easier to open and manage. For instance, there are no tax issues so investors are unlikely to have any involvement from the Internal Revenue Service. In addition, there are no penalties for transferring assets from a Gold-backed IRA to another account.

Another big advantage is that there are an increasing number of companies interested in offering the opportunity to invest in one of these accounts. That means it will be very easy for you to find a company who will provide an account that is suitable for your requirements. If you already have an Individual Retirement Account and it does not offer the opportunity for gold investment, you should have no difficulty in transferring to one that does.

401k Rollover to Gold

If you happen to decide on this course of action, there are a number of options for putting gold into an Individual Retirement Account. One is via a 401k rollover – that is, transferring funds from your 401k plan into a Gold IRA. This is one of the most convenient and popular ways as many people want to diversify from the perceived limitations of 401k plans. To do this, you have to ensure that you are qualified for distribution from the plan, and you should also remember that you need to complete the transaction in 60 days in order to avoid tax. Alternatively, you may ask your broker if you can add gold to your existing account. And if not, you can transfer the funds from your existing account into a gold account. Finally, you can of course open a new self-directed IRA which gives you the most control over your investment decisions.

The process of rolling over can take between 5 and 21 days. The first step in putting gold into your account is to select a custodian – that is, a specially qualified investment firm to look after your account. This custodian will store your gold on your behalf in an approved depository as you are not allowed to keep it yourself. You will have to submit all of the necessary paperwork to the custodian to enable yourself to open the account, including the fees. The fees include a one-off establishment fee for your account, an annual fee paid now and then every January, and also the first installment of your annual storage fee.

Purchasing and Storing Gold

There are two types of storage at the depository. You can choose fungible storage, which means that your gold is kept together with gold belonging to other investors. Or you may choose segregated storage, where your gold is kept separately and the exact coins or bars you’ve purchased will be the ones getting returned to you. The fees for segregated storage are usually slightly higher.

Although the decision about what you buy is entirely yours, the custodian will make the payment on your behalf to the coin or bullion dealer from whom you are buying your gold. The type of purchase you make will depend on your attitude to investment and your investment priority. If you are keen to capitalize on the performance of gold and its price movements, bullion gold coins would be your best choice. However, if your priority is long-term preservation of your assets, you might choose to add pre-1933 American gold coins which are guaranteed free from confiscation.

Restrictions on Gold Types

There are a number of restrictions as to the quality of the coins or bullion you can put in Gold IRAs. Gold bullion bars must be pure 24-karat and coins must be of at least 99.5 percent purity. This means you can include American Eagle coins and also Gold Proof American Eagle coins. Gold Proof coins were actually minted specifically for the purpose of retirement accounts. However, experts advise against buying the Gold Proof coins because they carry a very high premium, compared with the standard mint state coins which have exactly the same amount of gold. It is important to note this premium does not increase if the price of gold increases. The ordinary American Eagle coins are therefore considered a better buy.

The other coins that can be purchased include Australian Nugget/Kangaroo coins, Canadian Maple Leaf coins, Austrian Philharmonic coins and U.S. Gold Buffalo bullion coins. However, South African Krugerrand and British Gold Sovereign coins are not allowed as they are not considered to be of sufficient purity. You are also not allowed to include collectible or numismatic coins.

Alternative Ways of Investing in Gold

If you are not comfortable with physical ownership of bullion or coins, an alternative way of putting gold into your account is by purchasing shares in gold ETFs – or exchange-traded funds. These are funds which track the value of gold, and thus provide you with full exposure to the performance of gold without needing to hold it physically. For IRS purposes, these have to be ETFs which are approved as grantor investment trusts, such as SPDR Gold Trust. Another option for your Gold IRA is to purchase stocks in a mining company. These can potentially be extremely profitable, although they carry a much higher risk.

Weighing all the advantages of investing in Gold IRAs, it is clearly the best way to build protection and security as well as growth into your retirement plans. It is highly advisable to start sooner rather than later in order to take fullest advantage of the rise in gold prices that continue to be forecast for the immediate future. However, as with all investments, it is important to seek impartial financial advice and consider the wisdom of a diversified portfolio.