If you have been watching the stock market fluctuate, money markets stagnate, and gold prices rise beyond imagination, you might want to know how to turn your assets into gold. There is a quirky little paragraph in the personal retirement account laws that you might not know about. This law allows an individual to rollover an existing IRA or a 401k account into a “self-directed” IRA, which opens doors to “alternative investments” – Gold and precious metals, for example.
Self-Directed IRA and Alternative Investments
Suppose that you decide that now is the time to add gold to your retirement investment portfolio, you need to open a designated Gold IRA account held by an accredited custodian. These special IRAs are referred to as “self-designated” because you, and only you, have the authority and ability to determine what your IRA will invest in. The custodian is only there to “hold” whatever assets are accrued in your account.
These self-directed IRAs qualify for “alternative investments” that include Gold, Silver, precious metals, real estate, start-up businesses and as collateral on loans.
A Few Tidbits to Know about Self-Directed IRA Accounts
- The custodian of a self-directed IRA is not a financial adviser and by law, is unable to suggest or recommend how you should invest or how to balance your investments for diversity.
- Each self-directed IRA must be earmarked for the type of investment purpose. Therefore, you need to open a separate account for each type of investment in order to diversify your funds.
- When using a transfer or rollover 401k employer plans to open a Gold IRA if you have already left that employer. There are some rare exceptions, but 99% of the time, this rule applies.
Benefits of a Gold IRA Account
- In the last 12 months, investment bankers who are custodians of Gold IRAs have seen these holdings increase 5 times.
- Gold IRAs have consistently outperformed all other market sectors for five years straight.
- A Gold IRA does not have the high tax rates that apply to other investment options.
Your assets are actually gold – not “paper tiger gold” – gold bars and coins that are stored in a real brick and mortar location.
How to Open a Gold IRA Account
Opening an IRA account for gold investments consists of 3 steps. The most difficult part is finding an accredited custodian for gold IRAs. Once you have made the decision to include gold in your IRA, Regal Assets can suggest a third-party custodian if you desire.
- Step 1 – Open a self-directed IRA through an authorized Gold custodian
- Step 2 – Contact the custodian of your current IRA or 401k and ask them to instruct you on their particular “transfer out” process.
- Step 3 – Designate the new Self-directed IRA as a Gold IRA [or Silver IRA, or Precious Metals IRA]
If you do not know who the custodian of your current IRA or 401k is, the custodian of your new Self-directed IRA may be able to help you by contacting the agent with you on the line or by giving you the correct number to reach the custodian holding your current assets.
There are occasions when the current custodian needs the new custodian to fill out the transfer paperwork.
Rollovers vs. Transfers
Most people think that “rollover and transfer” are interchangeable terms for the moving of assets from one retirement account to another retirement account. According to IRS rules – not quite. One can cost you a lot more money than the other so knowing how your assets are being transported is important.
- Rollover – in a rollover, your actual assets [e.g. money] are sent to you personally. It is your responsibility to pay any taxes, any early withdrawal penalties that apply and to put the remaining funds into another retirement account within 60 days.
- Transfer – in a transfer, the actual assets are moved from the current account custodian to future account custodian either as a wire or check.
- 401k Rollover – there is a 20% distribution tax twist in the rules of rolling over a 401k into an IRA. Even though the funds are being moved under the “transfer” definition – custodian to custodian – the custodian in charge of your employer’s plan is mandated to take 20% of the distribution value and pay it to the IRS.
You have a shot a reprieve if your new IRA generates income within 60 days of the transfer that is equal to the 20% withheld you will get your money back on filing your tax return. Otherwise, you have paid your taxes in advance.
Of all the alternative investments that are possible using a self-directed IRA, Gold, Silver and Precious metals are the most reliable in this environment. Go here to see how well Gold IRAs have performed over the last 10 years.