Gold IRA Investments: An In-Depth Guide

As you save money for retirement, you can appreciate the importance of investing in more than just one type of asset. You want to avoid sinking all of your money into stocks, bonds, mutual funds or other assets in case they lose value and cost you the money you have put into them.

However, when you contemplate diversifying your portfolio, you may also seek out assets that offer the stability and high value you prefer. Your solution, then, can be to invest in precious metals like gold. Follow along with this guide to learn why a self-directed gold IRA can be one of your wisest retirement investment strategies.

Step 1: Understand the Basics of a Self-directed Gold IRA

A self-directed gold IRA is markedly different from other types of retirement accounts, such as Roth IRAs or 401(k) accounts. As its name implies, it is self directed, meaning you are in charge of deciding if, when and how much gold to buy for it.

However, despite the account being self-directed, you must obtain a guardian for it, per the IRS’s regulations for precious metal IRAs. You must also buy gold that meets certain IRS purity standards.

Specifically, the IRS requires you to purchase gold that is at least 99.5 percent pure. While you might bristle at having to follow IRS regulations when investing in gold, you can also take comfort in knowing these rules ensure the highest value and standard for your gold IRA. They also ensure the gold you purchase offers the financial security you expect of it.

Step 2: Weigh the Benefits and Risks of a Self-directed Gold IRA

Gold has the potential of benefiting your self-directed IRA in a number of key ways. Some of the benefits that gold can offer include:

Retaining its value over the course of years, if not decades
Avoiding rapid depreciation, as can happen with assets like the American dollar
Offering a tangible and valuable physical asset in which to invest
Securing your future purchasing power
Withstanding economic factors like inflation

Further, gold has historically been recognized as a valid global currency, giving you financial security wherever you travel.

However, you should understand that past and present stability and value do not always equate into future guarantees when investing in gold. Gold prices can sometimes fluctuate, although typically not as much as the prices of paper assets. Even if you invest in gold now, there is no promise of its market performance.

Step 3: Choose the Right Custodian for Account

The IRS will not allow you to retain custody of your self-directed gold IRA, even if you are the most confident and skillful of private investors. You must appoint an IRS-approved custodian for it.

When you consider your options for a self-directed IRA custodian, you want to select one who:

Has a good professional reputation
Has ample experience
Has good reviews from previous and existing IRA clients
Offers pricing transparency
Is easily accessible to clients

After all, the custodian you select for your self-directed gold IRA will not only serve as its guardian. This person will also serve as your guide in applying for and setting up the account, determining what kind of and how much gold to buy and where to store your gold after you purchase it. This person also needs to know details like funding and transaction limits for your IRA.

Step 4: Set Up Your Self-directed Gold IRA

After you select a custodian for your IRA, you can then proceed with actually opening and funding it. Your custodian will walk you through the application and opening process, securing the proper documentation. The custodian will also safeguard this paperwork for you after you open the account.

You can find out how much you need to fund the account and either use cash or transfer money from other accounts to your self-directed IRA. Many people like to transfer funds from accounts like a

Roth IRA
Traditional IRA
Simple IRA
401(k)
TSP
403(b)

If you transfer funds from an existing retirement account, you should find out from your custodian how long it can take to complete that transfer. Some transfers can take at least a week, if not longer, to complete.

Step 5: Create a Precious Metals Portfolio

Once you fund your self-directed gold IRA, you can give the custodian your approval to find and buy gold for it. Your custodian’s guidance during this process can allay any concerns you have about whether or not you are abiding by the IRS regulations for adding gold to this type of IRA.

Your custodian should ensure the gold you buy meets the current IRS purity standards, with it being at least 99.5 percent pure. You can also get advice about what form to buy gold in, whether it be coins, bullion or bars.

Heeding the advice of your custodian and ensuring the gold you buy meets the approved weight and purity standards and also has the refiner’s mark on it can bolster the value of your self-directed IRA. It also ensures you can take advantage of the tax benefits for your IRA and avoid potential penalties.

Step 6: Acquire and Store the Gold for Your New IRA

Once your IRA’s custodian advises you on what kind of and how much gold to buy, you can then give the go-ahead to complete the necessary transactions and make the gold yours. However, the IRS will not allow you to retain physical custody of the gold. You cannot keep it at home or in a safety deposit box at your bank.

Instead, you need to store it at a trusted depository. A depository will safeguard your gold for you, storing it under your IRA’s account name, until you decide to add more to it or liquidate it.

Still, despite the gold having to remain at a depository, according to the IRS rules, it is still physically and tangibly yours. In this way, gold differs from other paper assets, such as stocks and bonds.

Step 7: Remain Vigilant with Your Self-directed IRA

The storing of your gold at the depository does not end your investment journey. In fact, you should monitor your IRA often to ensure it grows in accordance with your retirement and wealth-building goals.

Along with keeping track of how much your self-directed IRA grows, you should also keep track of the market trends for gold. You can use this information to determine if you should add more funds to the account or perhaps even liquidate it to guard against large monetary losses.

Your IRA’s custodian can also provide insight about how well your new IRA performs. By staying informed about market trends and the value of your account, you can ensure you meet your retirement savings goals accordingly.

Step 8: Understand the Distribution Process

The IRS allows you to start taking penalty-free distributions from your self-directed IRA once you reach the age of 59.5. However, even as you may look forward to either taking ownership of the physical gold you have purchased or their monetary equivalent, you need to learn what implications this move can have on your taxes.

Before you take any distributions from your self-directed IRA, with penalty or not, you should consult with a financial advisor. You can decide how much you want to take in distributions and how much money you need to save out of them to pay your taxes. You can also figure out how to add those distributions prudently to your retirement income and avoid any expensive and unpleasant surprises when you file your income taxes the following year.

Step 9: Plan Ahead for Required Minimum Distributions

Once you reach the age of 72, the IRS requires you to take out RMDs, or Required Mandatory Distributions, from your self-directed IRA. You may not want to bleed the account dry as you continue to take RMDs over the course of several years or longer.

You can consult with your custodian about if and when to contribute more funds to the IRA to maintain its worth. You can also find out how much you can contribute at and past the age of 72 without incurring IRS penalties. You can incorporate the RMDs into your retirement income and avoid having to pay penalties or excessive taxes on them.

Conclusion:

A self-directed gold IRA can be a wise addition to your investment portfolio. Gold offers benefits that other assets, such as stocks, bonds and mutual funds, lack. You may gain more security and peace of mind when you diversify your investments with gold.

However, opening and maintaining a lucrative self-directed gold IRA can take more research and commitment than other kinds of investments. You must also follow several notable IRS regulations to reap the tax advantages offered with this type of account.

This guide can help you get started with adding gold to your portfolio, particularly when you are serious about building wealth for retirement. You can also learn more about adding gold to a self-directed IRA when you contact us today at Sedona Bullion.