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Gold IRAs have been steadily increasing in popularity over the past few years, but many Americans are unaware of the details of this investment vehicle. A gold IRA rollover allows an existing IRA to invest in physical gold bullion instead of paper assets like stocks and bonds. Here’s what you need to know about this kind of rollover, as well as information on why you should consider making one for your retirement portfolio.
What is a Gold IRA Rollover
In short, a gold IRA rollover is a tax-free distribution of gold, silver or platinum from your existing Individual Retirement Account (IRA) into a new self-directed account. A self-directed account allows you to purchase assets not typically approved for IRAs, such as real estate, hedge funds or fine art. The IRS does not have specific guidelines around what constitutes a good gold IRA rollover. In order for it to be completely tax-free there are two conditions that must be met.
The first condition is that your account must have been established for at least five years. The second condition is that all assets being transferred from your original account must have been in place for a minimum of 60 days before a rollover can take place. For example, if you wanted to transfer assets from your 401(k) into an existing gold IRA rollover, you would need to hold those assets in your current account for at least 60 days prior to executing any transactions.Once you’ve met both conditions you can transfer funds into an account designed specifically for non-traditional investments like real estate or art, pay off outstanding debts such as loans or credit cards with traditional investments, purchase stock in businesses or make any other investment decision available under self-directed accounts.
Once you have met all of these conditions, it is crucial that you work with a specialized tax professional in order to make sure that your rollover is done correctly. You may be able to do it yourself if you feel up to the task, but given how easy it can be to make mistakes, rolling over a gold IRA into another type of account without help can actually end up costing you thousands in taxes. Depending on your existing situation, an individual retirement account rollover may be a good option if you want or need more flexibility in making investments available through self-directed accounts. Or alternatively, an individual retirement account rollover may not be for you depending on your personal financial situation.
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A Step-by-Step Guide on Gold IRA Rollovers
If you hold physical gold or silver in an IRA, it may be time to make some changes. Gold is a volatile commodity that can fluctuate widely in price – especially over short periods of time. Many investors like to hold physical bullion as part of their portfolio, but when it comes time for retirement, they don’t want those assets influencing their portfolio. The good news is that there are ways you can easily convert those assets into a retirement account without having them affect your standard investment holdings. Let’s take a look at what a gold ira rollover is and how you can get started with one today!
The first step in setting up a gold ira rollover is to understand exactly what you’re looking for. With that said, you need to decide if your main goal is getting out of gold or avoiding price fluctuations. A simple way to accomplish either task is by using an exchange-traded fund (ETF) or mutual fund that tracks bullion prices. These funds help ensure that you have money on hand, even when those assets are no longer physically in your possession.
The second step is deciding how you want to convert your gold iras into retirement funds. There are a few different options on that front, but it largely depends on what you want out of those assets. If you’re concerned about longevity risk or overall portfolio diversification, then owning a physical bullion fund makes sense for your retirement account. Physical bullion doesn’t move around nearly as much as paper currency does, so it’s unlikely that there will be massive dips in value when converting from one vehicle to another.
The Different Types of Gold IRAs
Individual Retirement Accounts, or IRAs, have been a popular retirement tool for many years. Individual retirement accounts allow people to save money for their own future while reducing taxable income. IRAs are open to people who are at least 18 years old and qualify as an employee. However, before you invest in any kind of gold IRA account, it’s important that you understand all of your options first. There are actually three different types of gold IRAs available today – so it’s a good idea to understand all three before making a decision. If one option doesn’t work out in your favor – there is always another option available!
The three different types of gold IRAs that are available today include regular IRAs, self-directed IRAs, and Roth IRAs. A regular gold IRA works very similarly to a standard IRA account – except it allows investors to purchase physical gold bullion instead of stocks or mutual funds. Because of its flexibility, many investors find traditional gold IRAs appealing. Traditional IRAs are also called Individual Retirement Accounts (IRAs) as well because they can be used by individuals. A self-directed IRA differs from a regular gold IRA in that you have more control over your investments in an individual retirement account or 401(k). You will not be limited as far as what you invest in as long as it is permitted under law.
Should I Consider a Gold ETF Over Physical Gold?
You might be wondering why you should consider using a gold ETF instead of physical gold. A couple of reasons stand out. First, unlike gold coins or bullion bars, an ETF is easy to sell. If you need cash quickly—or just decide you’re done with gold—you can sell your shares online through your brokerage account in mere minutes (sometimes instantly). In fact, many investors buy shares in a target retirement fund that holds both stocks and bonds. By investing in such funds, investors can focus on their goals—retirement!—without having to worry about individual investments. The second reason to use a gold ETF is if you want diversification in your portfolio.
So far, we’ve established that buying gold is a smart idea—but how do you actually do it? There are two popular ways of owning gold. The first is to buy physical gold in the form of coins or bars. This is considered a direct ownership, since you own all rights over your piece of precious metal. The second way is through an exchange-traded fund (ETF), which involves indirect ownership of physical gold. To understand why you might consider investing in a gold ETF, let’s break down both types of investment vehicles.
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Investing in Bullion Coins vs. ETFs
In recent years, many investors have taken a liking to gold ETFs. They’re easy for most retail investors because you can purchase them through your brokerage account. However, there are some downsides. With an ETF, you’re trading on price; essentially, whatever someone is willing to pay for a share at any given moment (which may not correlate with how much that actual physical gold is worth). Bullion coins offer a more direct route. If you buy bullion coins in bulk—directly from mints or other trusted sources—you can get access to lower premiums over spot prices than what you would receive by buying ETF shares. The downside?
Although ETFs can be easier for new investors, you lose some control over your investment. Because you are trading on price, not actual value, bullion coins may be a better option for more experienced or savvy investors. If you’re someone who wants to access physical gold markets without having your money tied up in storage costs and insurance fees, bullion coins are ideal. Gold bars may also offer more liquidity than bullion coins, but they are generally reserved for large purchases or those who want a physical representation of their asset. Be aware that there can be a higher premium involved with bar purchases versus coin purchases; however, many buyers prefer bars because they have a lower rate of fraud than bullion coins.
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Pros and Cons of Gold IRAs
Before you roll over your 401(k) into a gold-backed account, it’s important to think about whether a gold-backed account is right for you. Some pluses of investing in gold through an IRA include that it can be used as collateral, meaning you can borrow against it; buying stocks or mutual funds with physical gold attached makes some investors feel safer because they can hold something tangible; investing in a commodity such as gold makes some investors believe they are protecting themselves from currency fluctuations; and depending on how your retirement plan is structured, it might not be subject to taxes when rolled over into an individual retirement account.
There are some negatives, however. An additional downside is that you might need to hold a substantial amount of money in your account if it doesn’t meet IRS minimums; investing in gold through an IRA means you can’t easily liquidate your assets without paying taxes; and some people may not want physical ownership of gold bullion. Some advisors say buying stocks or mutual funds with physical gold attached is a convenient way for those concerned about a stock market crash or economic upheaval to protect their assets from devaluation. Gold IRAs, however, tend to be relatively expensive and difficult for investors who plan to buy stocks or mutual funds that allow them easy access should they need cash flow immediately.