If you currently have a retirement account or investment portfolio that is biased towards stocks, bonds or any other asset bound to the dollar, you may have considered converting part of it to bullion coins or bars as a protection against inflation, currency debasement and economic uncertainty. This process is known as a Gold IRA Rollover.
While simply transferring funds from an IRA to a Gold IRA is an option, a rollover is a much safer and tax-advantaged strategy of moving your retirement savings. In this brief article, we will discuss the individual steps involved in a Gold IRA Rollover.
While some people tend to call any movement of funds from one retirement account to another a rollover, the IRS makes a clear distinction between a rollover and a transfer. In a rollover, the money being moved is paid to you and you then deposit the funds in the other account. In a funds transfer, the original custodian of the IRA transfers the funds directly to the new IRA custodian you designated to receive the funds. You basically never see the money.
Gold IRA Rollover Rules
In this case, if you were to do a Gold IRA rollover, you would have 60 days from the date you receive the funds to deposit the money in the Gold IRA Company or Custodian you have chosen. If you do not complete the transaction within this period, the money becomes a taxable withdrawal and you will face the 10% early withdrawal penalty if you are under 59 1/2. If you are withdrawing from a personal IRA for a rollover to another IRA, there is no tax withholding. But you can do only one rollover per year.
Gold IRA Transfer Rules
In a direct custodian-to-custodian IRA transfer, you do not have to worry about the 60 day transfer rule since you never receive the money. The transfer may is usually accomplished by wire transfer directly between the respective IRA custodians. The original IRA custodian can also accomplish the transfer by issuing a check made out to the custodian of the receiving IRA and mailing it out. This is the easiest way to invest in gold through your IRA since it is all handled in the background by your existing and new custodian.
401ks can have slightly different rules for rollovers and transfers. If you have a retirement plan through your current employer, you might want to check with them first. Some employers do not allow gold investment as part of their 401k plan unless you quit your job. Before diving into a Gold IRA Rollover, make sure you understand your employer's 401k plan. While there are ways around employer restrictions, it is helpful to know whether this will be an obstacle from the beginning of the process.
Careful research into the background and business practices of any potential Gold IRA company is very important for two reasons:
The reputable Gold IRA custodian you chose will be able to furnish you with all of the necessary paperwork and contact information needed to arrange your IRA rollover. Having this paperwork handled prior to the rollover date ensures that the money will be successfully transferred to the Gold IRA account within the IRS's required 60 day period. In some cases, your existing IRA custodian may choose to issue you a check for the full amount of your IRA and then you will have to arrange deposit of the full amount of these funds with the new Gold IRA custodian. There may be fees associated with the rollover of your current IRA and these should be discussed with your IRA custodian prior to making any decisions.
When investing in a Gold IRA Rollover, it's important to understand how you want to invest your funds and how your investment strategy affects your planning needs. We at Gold IRA Guide often receive emails from investors and retirees asking us: what percent of my portfolio should be allocated to precious metals? The reality is, there is no easy answer to this question. We have even interviewed several financial advisors and the opinions when it comes to gold allocation differ. Famous investors tend to stick to the 5-10% rule (e.g. Kevin O'Leary, Tony Robbins, Ray Dalio), but some more aggressive investors have gone above that. The questions you need to be asking yourself that will help you determine your bullion allocation strategy are: what is your outlook on the economy as a whole? How has your portfolio been performing so far? What is your main objective when it comes investing in physical bullion (e.g. protection, diversification, profit)? Here are some of the most popular strategies we've found by looking at several portfolios and speaking with many industry professionals:
1 – Diversification/Protection : if you feel that your current portfolio is biased towards stocks, bonds or mutual funds, allocating 5 to 10% of your entire portfolio size to precious metals can help you effectively diversify and protect your portfolio.
2- Loss of trust in the US dollar: if you smell the Weimar catastrophe in the air and lost confidence in the dollar (and other paper currencies), allocating 10 to 20% would be a more common strategy.
3- Future Profit: if, like some high net worth investors, you strongly believe that the price of gold will reach $5,000 or more per ounce in the next few years, then allocating 20%-30%+ of your portfolio could generate substantial profits in the coming years. This is NOT a position we recommend here at Gold IRA Guide simply because it's pure speculation. Beginner and intermediate investors should “play it safe” by going for a lower allocation, and adjust it annually based on results and the economic landscape.
Disclaimer: the content provided on this page and throughout this website is for informational purposes only. It does not constitute financial advice and should not be taken as such. Always speak to your financial advisor before making an investment decision.
Also remember that when investing through an IRA, IRS-approved bullion coins or bars are necessary.
Some IRA and 401k custodians also allow investors to utilize Gold ETF's, gold mining stocks or mutual funds. While this type of investment doesn't require the storage facilities needed by physical bullion, it should be understood that the Gold ETF is an investment in “paper gold” and not actual Physical Gold. [click here for more details]
The final, and perhaps most important, step in rolling over your IRA into a Gold IRA is locating a reputable Gold dealership with a good reputation, a competitive pricing structure and IRA-approved products. You could go to your local gold retailer, but we believe doing research online gives you more diversity and allows you to compare ratings and reviews of different dealers. Most Gold IRA custodians make it possible for the account holder to choose the precious metal dealer whom the coins/bars will be purchased from. (Hint: look for companies that have a “buy-back program” and offshore storage facilities. Stable countries such as Canada, Singapore and Hong Kong are our top choices for storage). See our 2019 company reviews page for a comparison table that will help you decide which company to work with.
The IRS laid out strict rules when it comes to the types of gold bullion coins and bars that you can invest in as part of your IRA. The coins need to be minted at a minimum purity level of 99.9% or better. This includes the American gold & silver eagle, Canadian Gold Maple Leaf, Austrian Philharmonic, American gold & silver buffalo and other similar coins. It also includes certain gold bars such as the Credit Suisse gold bar.
While there are some considerations involved in switching from a traditional IRA to a Gold IRA, the advantages of adding Gold to your investment profile make it well worth the trouble. Understanding the steps required to complete your Gold IRA Rollover will make the process both simple and stress-free from a tax standpoint.
Your first step is to find a company to work with. Check out our Gold IRA Companies page to see a comparison table of the leading firms in the field.