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A gold IRA is one of the best ways to ensure your retirement savings are safe and sound in the future, especially if you’re worried about the economy or political situation in the United States.
This guide to investing in a gold IRA will walk you through everything you need to know about opening an account, how to make your first purchase, and how to ensure your account stays free from fees and up-to-date with tax law changes.
How to open an IRA
Opening an individual retirement account (IRA) is easy. The first step is to contact the financial institution that offers the type of IRA you want. You will likely be offered one of two types: A traditional IRA or a Roth IRA.
The main difference between these types of IRAs is how they are taxed when they are distributed. If you choose a traditional IRA, then your contributions are tax-deductible and distributions at age 59 1/2 may be taxable as ordinary income, depending on your income level and other factors.
With a Roth IRA, your contributions are not tax-deductible but distributions at age 59 1/2 may be completely tax-free, depending on your income level and other factors.
What can you invest in?
The types of investments for an individual retirement account are limited only by the financial institutions that offer them. Almost all companies accept deposits and allow investors to choose what they want to put their money into.
Generally, though, IRAs will invest in stocks, bonds, mutual funds, and other securities. There are also self-directed IRAs which allow you to buy real estate or get involved with other investments not found elsewhere.
What are the most popular options?
One of the most popular options for investing in gold through an individual retirement account is called a self-directed Roth IRA. Another popular option for investing in gold through an individual retirement account is the traditional IRA.
Traditional IRAs allow you to save pre-tax dollars, defer taxes on the investment income until retirement, and enjoy tax benefits that are only available if the money is invested in a qualified plan like traditional IRAs.
Learn about some potential risks
Although gold is often considered to be a safe haven asset, because it's not tied down to any country's monetary policy and hasn't lost value since the 1970s, it still comes with some risks. For example, if the Federal Reserve were to step in and say gold was no longer legal tender, then you might find yourself suddenly without any of your life savings.
You also may have difficulty exchanging your bullion for fiat currency, should you ever need it. Additionally, like other commodities, the price of gold fluctuates depending on supply and demand from investors. It may not be as stable as other investments.
Where do I open my account?
In order to start your gold IRA, you will need to open an account with an institution. There are different requirements for institutions that offer gold IRAs, so it is important that you find the one that meets your needs.
One option is eTrade, which has no fees and offers plenty of investment options including gold. Other popular institutions include TD Ameritrade and Charles Schwab.
Along with the proper institution, you will also need to select what type of precious metal you want in your account.
How long does it take?
First, you'll need to open an account with a self-directed IRA. Then, find an independent gold investment company from which you'll purchase your assets.
The process of rolling over assets from your old retirement plan into the new one can take anywhere from two weeks to three months.Haammonths.
If you're looking for immediate gratification, this may not be the right type of investment for you. However, those who are patient and don't mind waiting will reap big rewards down the line.
Is there an early withdrawal penalty?
If you withdraw from your gold IRA before the age of 59 1/2, you will incur an early withdrawal penalty which could be equal to 10% of the funds you withdrew.
To find out more about whether or not this penalty applies for your situation, consult with an investment professional. It is important to note that penalties may apply even if you take a distribution from your account as part of a plan for distribution at retirement.
For instance, if you're 57 years old and retire, but want to use some of the money in your IRA as income during retirement (rather than withdrawing it all), there is still a chance that an early withdrawal penalty would apply.
Can I get started today?
A gold self-directed IRA is one of the most flexible retirement investments available today. It’s a combination of three types of assets, combined together into one:
(1) gold bullion,
(2) stocks and/or bonds, and
(3) cash.
You control what percentage of your total holdings go into each type, as well as when they get invested and when they are sold.