A number of investors may understand gold can be purchased and held in an individual retirement to save for retirement; some, though, might not be aware of certain elements that that type of investment can involve, says Kevin DeMeritt, founder and chairman of Los Angeles-based precious metals firm Lear Capital.
While traditional IRAs often contain items like stocks that can rise and fall in value — sometimes significantly, due to a variety of market conditions — self-directed gold IRAs may be able to offer more stability.
With gold only available in limited quantities around the world, historically, its enduring value has helped support prices for the precious metal. The average price of gold has, in fact, grown substantially since the early 2000s.
“Gold has dramatically outproduced the stock market,” Kevin DeMeritt says. “If you invested $100,000 in stocks in the year 2000, it would be worth around $320,000 today. But if you invested $80,000 in stock and $20,000 in gold, it would be worth $385,000 — an extra $65,000. If people get educated about precious metals, they’ll find it’s a great time to add at least some portion of their portfolio into this asset category.”
If you’ve been thinking about making a gold-backed investment, Lear Capital suggests keeping the following considerations in mind; these can apply when you open or add to a gold IRA.
Only Specific Types of Gold Will Qualify
Gold bars and coins are frequent gold IRA inclusions, but you can’t add just any item.
The Internal Revenue Service requires precious metals that are held in a self-directed gold IRA — such as gold coins or bars — to possess a certain purity level.
“The government has made these rules that it has to have a fineness to it,” Kevin DeMeritt says. “If it has that quality, then you can add it to an IRA; if it does not, then you cannot.”
To qualify for use in a self-directed gold IRA, gold items must possess a fineness, measured as parts per thousand, of at least 0.995.
Accounts Need To Be Funded Before Gold Is Purchased
Technically, you can’t just add gold bars and coins you may have on hand to an IRA for investment purposes; you need to first contribute funds to a self-directed IRA, and then use them to purchase gold.
If you need to set up a new self-directed IRA for precious metals, a provider like Lear Capital — which has successfully processed more than $1 billion IRA-related transactions — can help guide you through the process.
Once the new account is established, often within just 24 hours, you can opt to reallocate a portion of another eligible retirement account by rolling it over into the new IRA account; you can then use those funds to buy items like gold bars or coins.
A number of retirement accounts — including a Roth, SEP or SIMPLE IRA; 401(k); 403(b); 457(b); pension plan; or Thrift Savings Plan account — can be rolled over into a self-directed gold IRA.
The funds can be added to your new IRA account without incurring any tax penalties in two ways: by either a direct trustee-to-trustee transfer, or the 60-day rollover approach.
In a trustee-to-trustee transfer, money is moved from your current IRA provider to your new gold IRA provider. If you instead opt for a 60-day rollover, your current IRA account custodian will mail a check to you directly, which you need to send to your new IRA provider to deposit into your gold IRA account within 60 days to avoid tax implications or possible fines.
“If you have a 401(k) or an IRA, and you’d like to take a portion of that and move it over to a self-directed gold-backed IRA, you can do that,” Kevin DeMeritt explains. “[It] takes you about five, 10 minutes to put the paperwork together. You don’t have to [roll over] your whole IRA; you transfer any portion that you feel comfortable with.”
Physical Precious Metal Assets Must Be Stored in Specific Facilities
If you’ve purchased some gold coins that you hope will increase in value as an investment, and you don’t plan to make them part of any IRA, they can be kept at your home like other valuables you might buy and own, such as a painting or vintage car.
Any precious metals that pertain to an IRA, however, per IRS regulations, are required to be kept at an IRS-approved storage location. (Lear Capital customers’ gold, silver, and platinum assets, for example, are kept at the Delaware Depository in Delaware, which insures the items it stores for their full value, in case a fire, flooding, or other physical loss or damage occurs.)
You still own and control the assets; you just can’t retain physical possession of them while they’re part of your gold IRA.
“To continue to get the tax benefit of that retirement account, you cannot hold those metals yourself,” Kevin DeMeritt says. “The government needs to confirm that you actually have the metals.”
Limits and Fees Can Apply
The IRS has set limits on the number of rollovers and transfers investors can make within a 12-month period; typically, only one rollover per IRA is allowed, for instance. Any additional ones may incur taxes and penalties.
As with other types of investments, a gold IRA can involve fees.
While 401(k) plans can involve administration, service, and other costs, a survey conducted by AARP found that only 62% of plan participants didn’t know what fees they were paying for their account.
To ensure there’s no confusion about any fees associated with gold IRAs, Lear Capital has created a fully transparent process that involves sending investors a written account agreement for review and confirming the purchase details both in writing and by phone.
To make sure customers are completely satisfied, Lear Capital offers a risk-free purchase guarantee policy that allows you to cancel a transaction at no cost within 24 hours after receiving your invoice. Customer service representatives are also available from 9 a.m. to 5 p.m. PST to answer any questions you might have.
If you’re interested in finding out more about self-directed gold IRAs — or are ready to open or add funds to one — Lear Capital can help.
“Simply give us a phone call,” Kevin DeMeritt says. “One of our representatives will get you the paperwork to transfer whatever portion of that IRA or 401(k) or 403(b) you would like to roll over to a physical precious metals IRA. It’s a pretty easy process.”
Paula Newton is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Paula’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Paula has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Paula has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.