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Reasons to Invest in a Gold Individual Retirement Account
Gold and other precious metals are increasingly being used to fund Individual Retirement Accounts (IRAs) in place of paper currency such as bank notes, stocks, or bonds.
At its simplest level, a Gold IRA enables you to invest your retirement fund in Gold, Silver, Platinum, and Palladium. The reason Gold makes it into the title is simply because it is the most traded of the four precious metals allowed by the Gold IRA program, which was set up by the U.S. Congress in 1997.
Precious metal values are less prone to changes due to the prevailing inflation rate, making a Gold IRA a good choice for people seeking a long-term investment because it pegs the value of your fund to the price of these precious metals, which tend to be more stable than currency or stock-based investments.
While interest in Gold IRAs was initially muted, they have grown in popularity since the global financial crisis of 2008, when increases in the prices of precious metals offered something of a safe harbor from the worldwide financial uncertainty.
Is a Gold IRA Right For Me?
The price of gold and the other three precious metals often included in the term Gold IRA has steadily increased in recent years. Pegging your retirement fund to these precious metals could, therefore, offer a more stable return on your investment than sticking with currency, stocks and bonds, all of which tend to be more volatile.
For example, the value of spot Gold recently rose to a four month high of over $1,200 per ounce. The term ‘spot Gold’ refers to the spot price of Gold – essentially its current market value based on recent trades – rather than a “futures” value, which uses the spot Gold price to calculate the likely future value of the precious metals.
Even if you already have a paper-based IRA, or a workplace 401(k)-based retirement scheme, you can still opt to switch to an investment program based on precious metals. To take advantage of the scheme you must switch your IRA to one that is self-managed, and appoint a trustee who will handle the purchase (and holding) of gold from qualified vendors.
Where Does My Money Go?
As a holder of a Gold IRA, you essentially possess Gold coins or bullion, albeit indirectly through your trustee.
The rules covering a precious metals-based retirement plan require that any of the metals held must meet IRS standards regarding the grade and purity, and that your trustee must be a bank, an approved credit union, or savings and loan associations with the required secure facilities for storing the precious metals.
Although the legal requirement that a trustee be appointed means you will incur some additional charges when it comes to the management of your IRA, this should be offset by the stability of precious metal prices relative to paper-based investments, and the greater potential return on investment available as a result.
The cost of any fees is also offset by the fact Gold IRAs can be set up tax free, provided IRS rules are met.
How Do I Get My Money Out of a Gold IRA?
IRA funds invested in Gold and other precious metals are covered by the same rules as regular paper-based IRAs. Fund holders can turn their Gold into cash on demand via their trustee and an appointed precious metals agent, or even take possession of their precious metals.
If you do choose to liquidate some of your precious metal assets, however, you will be taxed in the same way as if you cashed in your paper-based IRA.
The key, though, is to know that it is no more difficult to turn your precious metals retirement investment funds into cash than it is with a currency, stock or bonds-based retirement pot.
How Do I Set Up a Gold IRA?
As noted, holders of existing paper-based IRAs can transfer their existing funds into a retirement fund based on gold and other precious metals.
To do so, the fund holder must first switch their IRA to one that they run themselves, and then appoint a trustee experienced in handling self-run IRAs. The main difference between a self-run and a trustee-run IRA is that the trustee will not offer investment advice to people running their own investment fund. Instead, the trustee is tasked with providing the necessary administration and financial reporting services.
You may also ask the trustee to find a precious metals vendor who is qualified to buy and sell the correct grade of Gold, Palladium, Silver and Platinum. If you opt to find a vendor yourself, its worth doing some background checks to ensure the provenance of the company.
Gold IRAs are growing in popularity, due to uncertainty in the value of paper-based investments compared to the stability in prices of precious metals. People with an existing IRA based on currency, stocks and bonds can easily switch to a Gold IRA, offering them greater long-term stability in the value of their investment, and a better chance of increasing their investment pot in-line with growing precious metal values.