IRAs, or “Individual Retirement Accounts,” are among the most common tools people use to save for retirement, though many do not realize that Gold IRAs are an option. Rather than being set up and partially funded by an employer like a 401K, individuals are responsible for establishing and funding an IRA. Many financial advisors and other finance professionals recommend investing through an IRA.
The way that most IRAs work is that the individual will fund their IRA account and then use the account money to invest in the stock market. IRAs are different from traditional stock market investing because of the way that you pay taxes. In conventional investing, you pay capital gains taxes when you withdraw the money. When using an IRA, you pay taxes on the contributions or the withdrawals, depending on which IRA type you are using.
Many people choose to invest in either a traditional or Roth IRA as part of their retirement savings plan. These are the two most popular types of IRA, which explains the popularity. Many people do not realize that a gold IRA is also an option.
What Is a Gold IRA?
Like an IRA that you use to invest in the stock market, a gold IRA can be set up as a traditional account or Roth. The difference between a gold IRA and a stock market IRA is that you can use a gold IRA to invest in precious metals, such as gold.
When you invest in precious metals through a gold IRA, you don’t physically own the gold. You will choose a “custodian” who will store and protect the gold for you. These custodians act like banks for your precious metals.
Why Invest in Gold?
Even without an IRA, investing in gold is a great way to diversify your investments. Gold has held value for generations and was even the standard for currency in many of the world’s economies for years.
One of the best reasons people choose to invest in gold is that it does well during economic turmoil. Historical trends show that the value of gold increases with inflation. This upswing means that anyone owning gold should be financially secure during poor economic times.
Another reason that many people choose to invest in gold is that it is great for diversification. You can make any investment portfolio more robust against economic uncertainty by having diversification. You don’t want to have all of your financial eggs in one basket, just in case that company or commodity loses its value over time.
People who invest in gold for diversification purposes would probably recommend that you not contribute a significant portion of your portfolio in gold and other precious metals. Historical trends show that the value of gold increases with inflation, but overall it does not perform as well as the stock market. Investing in some gold is a good idea, but it should not make up a majority of your investment portfolio.
Different Ways To Invest in Gold
There are many different ways to invest in gold. From keeping physical gold in your home to investing in a secure gold IRA, there are a variety of ways you can diversify your portfolio with gold.
Physical Gold
The first thing people picture when they think about investing in gold is physical gold bars and coins. While there are other ways to invest in gold today, owning physical gold is still a popular option for many people. This method of investing in gold puts the individual in charge of their investment. This option is attractive for many investors that have low confidence in banks and financial institutions.
The downside to owning physical gold is that the individual is responsible for keeping and protecting the investment. You could lose physical gold, or it could get stolen, and then the investment is gone.
Gold ETFs
Gold ETFs are another popular way to invest in this precious metal. Gold ETFs are funds that you trade like stocks, basically “virtually” investing in gold. You purchase a share of a gold ETF that represents physical gold. When the value of gold increases, so does your share of the gold ETF. Then, when you want to cash out, you simply sell your ETF share.
With this method, you are still investing in gold, but you don’t have the responsibility of maintaining the asset. You also don’t have to do anything in the liquidation process to access your finds.
Gold IRA
With a gold IRA, you can experience the financial benefits of investing in gold without having to hold and keep track of it yourself, like with a gold ETF. When you invest in gold through an IRA, you don’t have to keep track of the gold yourself. You are simply buying the gold, storing it elsewhere, and reaping the benefits of its increased value.
Gold IRAs are different from gold ETFs because they experience the same tax benefits as a regular IRA. You can choose to set up a traditional or Roth gold IRA, meaning you can choose when you get taxed on the money invested.
This option is excellent for anyone that wants to have gold as a significant portion of their investment portfolio, specifically for retirement. Depending on your current and expected income levels at retirement, you can set up the ideal gold IRA for your retirement funds.
How To Invest in a Gold IRA
Now that you know about the many benefits of investing in gold through an IRA, you might be wondering how you can open an account yourself. There are a few steps involved in the process, but know that the company setting up the account will do most of the work. You just need to make a few decisions about your investment.
Decide What Type of Gold IRA You Want To Invest In
Once you decide which company to open your account through, the first step is to determine which type of gold IRA you will open. We have already mentioned that there are generally two options when opening an IRA: traditional and Roth. These two options apply to gold IRAs as well as stock market IRAs.
Traditional IRAs work by taxing the money that you withdraw as income. This option is usually the best for anyone who expects to be in a low tax bracket when they retire because they will pay taxes according to their lower income level. People who might choose this option could plan to do a “soft retirement,” where they start working part-time or at a more straightforward job before they reach retirement age.
You pay taxes on the money in a Roth IRA when you deposit it in the account. This option is best for anyone that expects to be in a higher tax bracket when they retire. This rationale is because they will pay taxes at their current, lower income. This option is best for anyone that expects to move up the ranks in their career to be a high earner by the time they retire.
When you open your account, you will need to decide whether your gold IRA will be traditional or Roth. It won’t be possible to change your mind later on, so it’s important to consider whether being taxed at the beginning of your investment or the end makes the most sense. If you’re unsure which choice is best for your financial circumstances, you can speak with a certified financial advisor. This person will ask you some pertinent questions to help determine how to proceed.
Choose How To Fund the Account
The next decision you will need to make is how to fund the account. You will need to start with some money in the account to buy the gold you will be investing in. Many people choose to fund their gold IRA account with money from their existing traditional or Roth IRA. You can do this tax-free as long as you put the money in your gold IRA right away. You have a few options for how to do this.
The first option is the “rollover” method. With this option, you will withdraw money from your existing IRA and deposit it into your new gold IRA. With this method, you, as the owner of both accounts, are responsible for the money during the transfer process. If you choose this option, keep in mind that if you wait longer than 60 days to deposit the money in your new IRA, you will have to pay taxes and penalties on the withdrawn money.
Another option that you have is the “trustee to trustee,” or direct transfer method. With this option, you will instruct the company or bank that manages your current IRA to transfer the money directly into your new gold IRA account. With this option, you don’t have the responsibility of withdrawing and depositing the money yourself. This option is also tax and penalty-free.
No matter which option you choose, you must transfer your money between two of the same accounts. For example, you can’t deposit money into a traditional IRA (with no upfront taxes) and then transfer it into a gold Roth IRA (with no taxes at withdrawal).
You might also choose to fund your new gold IRA with your new contributions. Keep in mind that you can only deposit $6,000 ($7,000 if you are over the age of 50) per year across all of your IRA accounts. If you choose to fund your account this way, it will take time to earn a significant amount of money in the account. That’s why many people decide to move funds from an existing IRA account to set up their new gold IRA.
Choose Where You Will Store the Gold
The next choice that you will need to make is where you will store the gold. The facility that holds your gold investments is also known as your “custodian.” The company that you open your gold IRA account with might have recommendations for which custodian to choose to store and protect your gold.
The IRS must approve the custodian. Do some research about different available custodians to find the one that meets your needs and doesn’t have extremely high fees.
Buy and Ship Gold
The final step in opening your gold IRA account is buying and shipping the gold to your chosen custodian. The company that manages your account will do most of the work here. You will just need to decide how much gold you want to invest in, if you wish to invest in any other precious metals, and direct the company to the correct custodian.
How To Withdraw Your Funds
There are a few ways that you can withdraw money from your gold IRA account. Like with any IRA, you will face penalty fees of 10% of the withdrawal value if you remove funds before you reach age 59 and six months. You should avoid this if at all possible.
You may roll over the funds in your gold IRA to another type of IRA without paying any fees or penalties as long as you do it within the required period that we discussed previously.
You have a few options when you have reached retirement and want to start withdrawing funds from your gold IRA. You can either withdraw your funds as cash or withdraw the actual gold you invested in. When you withdraw as cash, the account manager will liquidate the gold for you.
If you choose to withdraw physical gold, then you will be responsible for it. You can choose to keep it, though you run the risk of it getting lost or stolen. You could also find somewhere to liquidate it yourself.
Set Up a Gold IRA With Century Gold Today
Gold IRAs are a great tool to use for retirement investing. Gold is a commodity that will likely always hold value and serves as outstanding protection against inflation. Diversify your investment portfolio today by opening a gold IRA through Century Gold. Call today at {PHONE NUMBER} to start the process of opening and funding your gold IRA.
