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Everything You Need To Know About The Process Of Rolling Over Your Current IRA Account To A Gold IRA Account
Unlike a traditional IRA, a gold IRA allows the account owner to invest in approved gold assets including coins and bars, which are held by an approved custodian for the benefit of the investor. Apart from this, a precious metals IRA functions in more or less the same way as a regular individual retirement account. Below is everything you need to know about the process of rolling over your current IRA account to a gold IRA account.
The Rollover Process
You can effect an IRA rollover in two ways:
To execute a direct rollover, you have to inform your current IRA custodian of your intention to transfer your contributions to a new custodian that allows precious metal investments. According to the Internal Revenue Code Section 408(a), such a custodian/trustee must be a bank, savings and loan association, federally insured credit union, or an entity that is approved by the IRS to act in such a capacity. With this in mind, the new custodian you have chosen should give you a precious metals IRA application form to fill. This is in addition to a document directing your current custodian to close your current IRA and transfer the funds to the new custodian. The beauty of such an arrangement is that the two custodians handle the bulk of the relevant rollover processes including opening a new individual retirement account, funding it, and closing the old one. In most cases, it takes two weeks or even less to complete transferring retirement funds.Financial experts recommend a custodian-to-custodian transfer because it is tax-free.
An indirect rollover involves taking distribution of your retirement funds and then depositing them in a precious metals IRA. However, this strategy has several disadvantages. For starters, the IRS requires custodians to withhold 20% of the retirement savings withdrawn indirectly for federal taxation purposes. In addition, the IRS requires individuals who execute an indirect rollover to deposit the funds in a new retirement savings account within 60 days. If you fail to do so, the IRS will treat the distribution as ordinary income that is subject to ordinary tax rates and you must include it in your annual tax returns. What's more, you must top up the 20% federal tax withholding with your own money. Nevertheless, you can still complete a gold IRA rollover if you do not have the money to top up the 20% difference. Unless you have solid financial footing, it is advisable to avoid an indirect rollover because it could lead to taxation and legal issues if you do not comply with the IRS regulations.
The Benefits of a Gold IRA Roll Over
A gold IRA account gives you greater flexibility in diversifying the assets held in your retirement account. This is important because most traditional individual retirement accounts tend to be heavily biased towards stocks, bonds, and mutual/hedge funds. The problem with such an investment approach is it increases the risk of wealth erosion in the event of stock market or economic downturns. For this reason, financial experts and planners recommend diversification when investing in tradable assets. Take note diversification strategies vary depending on an investor's risk appetite and goals. Nevertheless, most investment advisors recommend apportioning 10 to 30% of an investment portfolio to precious metals such as gold.
Enhance retirement portfolio liquidity
Gold is an easily tradable precious metal due to high global demand mostly driven by Chinese and Indian consumers. Moreover, gold is a finite commodity with wide ranging applications especially in the electronics industry. For these reasons, finding a buyer should you want to divest in the future is very easy. This approach may be more desirable than selling highly valuable stock holdings such as Berkshire Hathaway shares.
Peace of mind
It is also worth noting that the IRS has strict regulations on the quality of gold that can be held in a precious metals IRA account. For instance, gold coins and bullion must satisfy the criteria defined in the Taxpayer Relief Act of 1997. One of the key requirements is ensuring that the gold assets in your precious metals IRA are at least .9995 pure. This means you do not have to worry about the quality of the gold assets you are buying. In addition, you do not have to prove the authenticity and quality of your gold assets to buyers in the future. Your custodian can also take care of gold storage in a secure facility that complies with the applicable regulations. While these aspects may seem trivial, they ease the hassle of executing financial transactions. Remember seniors may not have the energy, time, and mental clarity to resolve highly complicated transactions.
Although the US dollar is one of the most valuable and stable currencies, it is still prone to periodical volatility due to market pressures and monetary policies adopted by the Federal bank. This may make it financially unwise to sell if such an event occurs at a time when you had planned to divest. To avoid such an outcome, savvy investors always increase their gold asset holdings whenever they anticipate currency volatility.
Easy rollover process
Unless you opt for an indirect rollover, the entire process is very easy meaning you do not have to worry about being hobbled by bureaucratic red tape. In addition, most precious metals IRA custodians offer guidance and expert counsel to traditional IRA owners who may want to carry out a rollover. To top it all, assistance is usually free. Besides this, your custodian will keep you abreast of progress and new developments during the transfer process freeing you to focus on essential tasks such as work or parenting. It is also possible to execute an IRA rollover entirely online without ever travelling to meet any of the custodians involved in the process.
A gold gold IRA transfer is beneficial in several ways including an easy rollover process, hedging against currency volatility, enhancing the liquidity of your investment portfolio, asset diversification, and peace of mind. More importantly, a custodian-to-custodian rollover is tax free, which means you do not have to worry about huge transactional costs.