If you have been thinking about getting more diversity from your IRA, you may have thought about adding a gold IRA as a diversification strategy. Gold does have many benefits that can help cushion your retirement savings from inflation and economic upheaval. However, you may be wondering whether it is the right time to rollover to a gold IRA. You need to consider certain factors to decide whether rolling over to a gold IRA is the best choice for you.
Complexity in rolling over
One of the elements that influence the appropriateness of a rollover is the type of retirement savings account that you have. Those who have IRAs have greater flexibility, allowing them to rollover some or all of their retirement savings with ease. However, 401Ks are somewhat different. They are structured to allow rollovers only when you retire or when you switch jobs.
One way to work around this problem is by asking the employer to give you a promotion. Effectively, you have to resubmit your retirement savings you can switch to an IRA. The caveat in this instance is to ensure that you only rollover a portion of your retirement savings. At most, 20 percent of your retirement should be rolled over.
Moreover, ensure that the gold IRA follows the same taxation format as your previous retirement savings account. Those who have Roth IRA should ensure they get Roth gold IRA and those with traditional IRAs and 401Ks should stick with the same taxation system. The current regulation makes it easy to rollover when changing jobs or just before retirement.
Volatility of the market
Another consideration should be the volatility of the gold market. Gold tends to appreciate in bearish markets. Any investor should purchase gold while in a bullish market in anticipation of a financial downturn. Gold prices are quite volatile, and only long-term speculation should be used. Financial experts advise that you should retain gold for at least three years for you to enjoy some handsome returns.
The current bullish market means that the price of gold is not as high as in previous years. This presents an opportunity to purchase gold at lower price points. Just remember it is a long-term investment of at least three years.
Before you rollover to a gold IRA, you need to understand the hidden costs that may affect your portfolio. There are four additional costs on top of the price of gold.
a. Retirement IRA set-up
Whenever you open a new IRA, the company of choice will charge you this one-time fee. Ensure you consider this fee when choosing the company that sets up your gold IRA.
b. Custodian fees
The institution that will hold your IRA is called a custodian, and they normally charge an annual, monthly or quarterly custodian fee. The custodian fees are a combination of administrative and transaction fees charged by the institution. Ensure that you choose custodians with a reasonable custodian fee to avoid high administrative cost.
c. Storage fees
Any gold you purchase through your IRA will be physically delivered to you within 14-90 days. Once you get possession of your gold, you are required to store it in an IRS-approved depository. The depository charges storage fees. Take utmost caution when selecting the depository. Ensure your gold is adequately insured against theft.
d. Markup or seller’s fee
Whenever you purchase gold bullion or novelty coins, the institution increases the price to accommodate profit or commissions to representatives. The markup varies depending on the institution and the product. Gold bullion and treasury-minted coins have the lowest markups at an average of 15-18 percent of the value while specialty coins can rise to over 30 percent.
Conduct due diligence to determine the true cost of the gold you are purchasing to determine the markup the institution levies. One way of avoiding unscrupulous institutions is by seeking fiduciary assistance before any purchase.
The current economic climate is bullish, but there is a lot of potential of an economic downturn as the government seeks to shake-up major sectors like healthcare and taxation. This is the ideal time to rollover a portion of your retirement savings into a gold IRA. Bear in mind that this is a long-term investment and try to avoid exorbitant hidden costs when choosing the financial institution.