How Do You Buy Gold in a Self Directed IRA?
Self-directed IRAs allow investors to diversify their investment options beyond stocks, bonds and mutual funds; traditional IRAs only provide paper investments like stocks.
Self-directed IRAs allow owners to invest in assets that best suit their portfolios and investment goals, such as real estate, private equity in privately held companies, checkbook IRA/LLCs, notes and cryptocurrency.
Purchasing Physical Gold
Gold and precious metals have become an increasingly popular investment option, providing diversification against market fluctuations or inflation worries and providing potential gains. Unfortunately, they’re less liquid than stocks and therefore more costly to own and hold onto for the long-term.
Investors looking to add precious metals to their retirement accounts have two options for investing in precious metals: direct purchase or using a self-directed IRA to invest in physical gold and other bullion. Either way, finding an experienced custodian that can ensure purchases meet IRS regulations is key.
As opposed to traditional IRAs, which only provide access to stocks, bonds and mutual funds as options, self-directed IRAs allow investors to select from an extensive array of investments such as real estate or precious metals. All IRA rules regarding contributions, distributions and taxes still apply regardless of which asset types investors select from.
To comply with IRS requirements and prevent self-dealing, all IRAs must be held by an IRS-approved custodian. This financial firm oversees your account’s investments. Gold IRA custodians often have multiple approved depository locations where precious metals can be stored safely.
These companies will oversee your account, report to the IRS and charge annual fees that could include one-time account setup charges, annual maintenance fees, seller’s markup (which refers to how dealers markup precious metal prices), storage fees (paid directly to an approved depository), and insurance fees.
Investors typically invest in precious metals because they believe these assets provide a form of currency that retains its value no matter the economy. It is essential, however, to research your dealer to ensure they are trustworthy without any histories of complaints or lawsuits against them.
Investing in precious metals can be a great way to protect your wealth over the long-term, as well as an excellent hedge against inflation. Before diving in head first, ensure your investment plan can accommodate gold investments.
Self-directed IRA accounts give investors direct control of their retirement assets. Investors can purchase various investments, including physical gold. Self-directed IRA accounts are subject to IRS regulation and must abide by similar guidelines as conventional IRAs.
An IRA account may only purchase precious metals that meet IRS standards, such as gold bullion coins and bars. Investors cannot purchase slabbed or graded “rare” coins deemed collectible by the IRS and therefore barred from an IRA account. Instead, only approved precious metals should be purchased from an authorised dealer who holds all relevant licenses, registrations, insurance coverage and bonds to make purchases safe for their account holders.
Custodians typically charge account setup and maintenance fees as well as storage and insurance fees when setting up an IRA, with gold investors possibly incurring an additional markup depending on which dealer they buy from.
When investing in physical gold through your IRA, the proper way is to roll over funds from an existing retirement account into a Self-Directed IRA and direct its custodian on which IRS-approved bullion products to purchase and where to store them. Investors who fail to follow this procedure could face distribution penalties as well as taxes upon taking delivery of their newly purchased gold – any violations could incur penalties of between 10-20% on top of taxes due.
In order to avoid such potential pitfalls, be sure to choose a gold IRA company with a proven record for fee transparency and relationships with secure depository facilities. A reliable gold IRA firm will make it simple and audit-proof for you to receive your gold.