Times have become more uncertain and the financial status of our economy is becoming more shaky forcing investors to look for alternative ways of securing their future. Most people have turned to investing in gold. Though the investment is tricky and risky, it offers better returns as compared to any other investment. In addition, by investing in gold, people are able to diversify their portfolio.
The Roth IRA is an individual retirement account that is tax-free. Once you invest in this type of account, you will not have to deduct contributions. Unlike a traditional IRA, a Roth IRA does not allow you to make withdrawals. Also, it allows you to continue making contributions even after you are 70 years of age. Funding is possible in different ways; it can be through contributions, transfers or even rollovers from existing Roth IRA’s. Just like any IRA rules, the precious metals that are stored in the Roth IRA remain in the custody of the IRA custodian.
When compared to other retirement accounts, the Roth IRA has a clear advantage of offering low contribution limits. People who are under the age of 50 can contribute $5,500 annually, while those who are above 50 years have the option of adding $1,000. However, should you make a withdrawal before the stipulated time, you will incur a 10% penalty. In addition, a fine of 6% is charged for all the income that has been contributed in excess over the annual limit. Some of the top-rated Gold IRA companies include Regal Assets, Advantage Gold, Lexi Capital, Cornerstone Bullion and Monex. The company with the highest Gold IRA reviews is Regal Assets.
One cannot invest in the physical gold bullion by using a standard Roth IRA. The easiest way that you can invest in gold through the IRA is by buying stocks in gold mining companies or by purchasing a mutual fund that has mining stock companies. This is referred to as buying ‘paper gold.’ Other ways of investing indirectly in gold include using gold ETFs (GLD) and mining ETFs. When investing in ‘paper gold’ stocks, there are a lot of options to choose from. Gold indices like the BUGS Index (HUI) and also the Gold Miners Index (GDX) contain a list of the companies that one can invest. Investing in gold stocks is riskier as compared to the physical gold due to the quick rise and fall in prices. In addition, the gold stocks also have regulatory risk, cost of production risk, management risk and the flat currency risk.
One can use the self-directed Roth IRA to invest in U.S gold coins. This can only be done in increments of one, one-half, one-quarter or even one-tenth of an ounce. You can also invest using one-ounce silver coins that have been specifically minted by the United States Treasury Department. Silver and gold bullion can also be used, though they have to meet the requirements that have been stipulated by the IRS. For one to be able to store gold and silver coins, the coins must be very pure. Moreover, they should have more actual currency value than those of the collection value permits. Coins or bullion that have not been allowed by the Internal Revenue Code are considered collectibles and are thus not permitted into a Roth IRA account.
Gold IRAs can either be traditional or Roth IRA. In gold IRA, the gold must be physical, that is, you have to invest in actual gold. As you are investing in physical gold, the gold must be stored in a safe facility and thus, you will be expected to pay storage fees. The precious metals are stored in traditional vaults or any other vault that has a top-notch security system. When you want to cash out your gold investment, specific rules have to be followed to the latter. Due to the strict nature of these rules, you may be required to pay a seller’s fee which is inclusive of any taxes.
Precious Metals That Can Be Stored
The Roth IRA is very specific to the type of precious metals that can be stored. The precious metals that are permitted include Silver, Gold, Platinum American Eagle coins, a coin that has been issued under the laws of any state and gold, silver, platinum or palladium bullion that meets the required fineness requirements. The fitness requirements dictate that the gold must be.9950 pure, the silver must be.9990 and both the platinum and the palladium must be.9995 pure. The bullion coins must be uncirculated and in excellent condition and the proof coins must be ungraded and complete with the certificate of authenticity. Any precious metal that fails to meet these requirements cannot be stored in the account. Some of the products that cannot be stored include the pre-1993 gold, 90% US silver and gold Krugerrand.
This is a great investment to make as it allows investors to put post tax money into the IRA. Upon retirement, the investor can begin making withdrawals from the account without any fear of being taxed as long as the account has been opened for a minimum period of five years.
For one to execute a rollover or transfer from an existing IRA to a self-directed precious metals IRA requires a self-directed custodian who will help you complete the process. The duration of time that it takes for the rollover to occur depends on the custodian.
It is worth noting that a gold-backed Roth IRA gives you the privilege of investing in other precious metals like palladium. In addition, it also gives you the opportunity to make investments in other assets and commodities like stocks and real estate.
Roth IRA investing offers a lot of advantages to the common investor and is thus a sure way of investing in retirement. It has certain restrictions just like the other precious metals IRA accounts. These