What is a Gold IRA Rollover?
Many investors and individuals saving for retirement do not understand Gold IRA rollovers. The majority of IRAs are used to hold paper assets. A gold IRA provides the owner with the opportunity to hold precious metals. Provided the Internal Revenue Service for IRAs has approved the metals, the desired metals are purchased then delivered and stored.
The individual must select an IRA custodian and approved depository to complete the process. When the person has movable funds or an IRA account through an employee retirement plan, some or all of the funds can be transferred to a Gold IRA account. A transfer is defined as moving funds from an IRA at the request of the owner to a different IRA without the individual having custody or control of the funds.
A Gold IRA rollover occurs when funds are taken from an employee retirement plan and rolled directly into a Gold IRA by the administrator or trustee of the IRA. In some instances, a 401k can be used for a Gold IRA rollover. There is a wide range of companies in the industry providing clients with assistance in completing this process.
How Does a Gold IRA Rollover Work?
A self-directed IRA must be opened before an existing retirement account can be rolled over. This type of IRA enables the individual to hold precious metals through an approved gold ira custodian. Selecting a supplier for purchasing precious metals is important because the majorities are authorized to offer a selection of custodians. The supplier will then help complete the paperwork necessary to ensure the transfer is smooth.
If funds are moved from an established SEP IRA or a traditional Roth IRA to a self-directed IRA, a transfer request must be completed along with a new application. The experience of the supplier is often essential because this document fairly complex. The transfer request includes basic details regarding the existing IRA such as the name, current custodian, account number and the amount of funds requested for transfer.
When funds are moved between IRAs, it is referred to as a direct transfer. This is because the owner of the IRA does not take possession of the money. In most instances, 10 to 14 days are required to complete a direct transfer. The current custodian provided transfer documents are accepted by fax can expedite the process. The time period is further decreased if funds are transferred by wire as opposed to a check.
How Does a Gold IRA Rollover Work for 401k and TSP Accounts?
The definition of a roller is transferring funds from a TSP, 457b, 403b or 401k to a self-directed Gold IRA. Rollovers are permissible for a variety of reasons including retirement and changing employment. If the individual still works for the company responsible for creating the IRA and is a minimum age of 59.5, an in-service distribution is generally possible.
This process allows the individual to perform a partial rollover for a Gold IRA. The best way to determine if the individual qualifies is to contact the administrator of the plan. There are two different types of rollovers for a Gold IRA, direct and indirect. An indirect rollover is the more complicated of the two. The provider of the existing 401k sends the account holder a check for the funds.
The account holder then deposits the check into a personal bank account. At this point, the individual is allowed 60 days for re-depositing the check into a new Gold IRA to qualify for a taxable distribution. If the individual has not yet reached the age of 59.5, a 10 percent penalty will be incurred. The process for a direct rollover to a Gold IRA is simpler and more straightforward.
The provider of the 401k issues a check to the new custodian of the account. The check is mailed to the account holder then forwarded to the custodian or directly sent. The majority of 401k providers have the ability to begin a Gold IRA roller over the phone with verbal consent. If the government sponsors the retirement account, internal rollover documents must be completed.
This lengthens the time required to complete the process to between two and six weeks. The IRS per year permits only one rollover for each account. Transfers from custodian to custodian are unlimited. To purchase gold or silver products including coins and bars for a self-directed IRA, the individual first selects metals with IRS approval. The dealer on behalf of the client completes an Investment Direction form.
The document is then sent to the client for a signature. Once the dealer has received the signed document, contact is made with the custodian so the purchase can be finalized. The precious metals are then sent to the depository chosen by the account dealer for safety and security.
The process of selling gold or silver is just as simple as making a purchase. The individual contacts the dealer to secure a buyback price. An Investment Direction form is then sent to authorize the transaction with a signature. The custodian is contacted to transfer the precious metals to the account with the proceeds sent by wire transfer.
How Can Gold Be a Hedge Against Inflation?
One of the most frequently asked questions within the industry is how can gold be a hedge against inflation. The standard definition of inflation is the rising cost of services and goods as time passes. Technically, this is a symptom of inflation. Inflation actually occurs when the money supply in an economy is expanded. This means additional currency is used to purchase the same amount of services and goods.
The result is an increase in prices. Governments and banks are currently creating large quantities of currencies much faster than services and goods become available. This is the reason prices are increasing steadily with the passage of time. The expansion of the fiat currency supply is now present in economies across the globe resulting in an inflation of prices.
Many experts consider gold a hedge against inflation. Gold enables the holder to maintain purchasing power for a long time. Although the prices of many commodities including oil are fairly stable, this can change quickly due to s stock market crash or high volatility. When the stock market drop, the price of gold almost always goes up.
A good example is going back to the 1940s post World War II. At this time, the price of one ounce of gold was fixed by the Bretton Woods system at $35 United States dollars. If an individual living during this time period left the same ounce of gold to future generations, the purchasing power would not have declined. The individual in control of the gold would not have a $35 value, but a value of roughly $1,400.
This person would be able to use the funds to purchase the services and goods most desirable at the time. Some people believe the cost of gold has become more expensive over time because the alternate perspective has not been considered. More fiat currency is required to purchase the same ounce of gold due to the significant depreciation of the value of fiat currency over time.
If the value of fiat currency became worthless for any reason, gold could still be used to purchase services and products because the value is maintained. This is the reason gold is an ideal hedge against inflation. The devaluation of currency all over the world is still under debate. Protecting wealth with currency is nearly impossible but the same is not true of gold.
The price of precious metals reached a high in 2011 at more than $1,900. Since then, the price has decreased. This offers investors an ideal opportunity to preserve wealth by purchasing gold.
Why You Need a Self-Directed IRA to Own Gold in Retirement
A self-directed or Gold IRA is a type of Roth or traditional IRA enabling the individual to receive tax advantages while saving for retirement. The contribution limits remain the same. The only difference between a traditional and self-directed IRA is the types of assets able to be held in the account. A traditional IRA generally holds fairly common investments including mutual funds, stocks and bonds.
A self-directed IRA offers a lot more possibilities. The individual can invest in precious metals, a privately held company or real estate. The process of adding assets to an IRA begins with finding a custodian to hold the account. Retirement funds can be used easily to purchase gold with no penalties. The first step is opening a self-directed IRA.
IRS regulations permit investors to purchase alternative assets including gold, silver, tax liens and real estate. This enables the investor to diversify the portfolio to protect wealth. The IRS does have regulations regarding which types of precious metals qualify for inclusion in a Gold IRA. Provided these regulations are met, purchasing gold for a self-directed IRA is legal.
Why You Need a Self-Directed IRA to Own Gold in Retirement According to IRS Regulations
The regulations of the IRS affect the specific types of coins and precious metals that can be added to a Gold IRA. These regulations state the purity level of the metal must meet IRS standards. For gold, this is 99.5 percent. The purity requirement for silver is 99.9 percent. This is applicable for coins, bars and bullion. Purchasing these assets offers a hedge against inflation in addition to protecting wealth.
There are many firms available in the industry with the knowledge and experience necessary to ensure all precious metals purchased for a Gold IRA have received approval from the IRS. Many investors turn to these firms when they become interested in diversification. This enables the investor to take advantage of less volatility and higher yields.
Setting up a new Gold IRA or rolling over an existing account with one of these firms is generally a straightforward process. The company helps the individual throughout the process by answering questions, explaining what needs to be done and offering approved custodial and depository services often available through a partnership. All the individual needs to do is review the documentation, answer or ask questions and sign.
Once the IRA has been established, it must be funded. This can be accomplished by making a contribution equal to or below the yearly limit or rolling over funds from a qualified IRA or 401k. Some providers offer an option to set up automatic investments at specific times. Once the account has been funded, the next step is to make an investment through the custodian.
Precious metal and gold dealers have qualifying metals available and will contact the custodian on behalf of the client. There are a lot of advantages to establishing a self-directed IRA in addition to securing savings for retirement. The most beneficial advantages include:
- A self-directed IRA offers a larger variety of investment options for portfolio diversification.
- Investments can be selected according to the experience, knowledge and passions of the account holder.
- The wider range of investment opportunities often included a better appreciation potential.
- The investments and earnings offer built-in tax breaks.
- Diversifying funds offer the opportunity to invest in traditional or retirement investment accounts and still have funds stored in a self-directed Gold IRA.