What Exactly Is A Gold Based IRA

Finance | Retirement | Gold IRA | Article By: eBackers Staff Writers – 18th April, 2020

If you’ve done any investing, I bet that you’ve come across something called a gold IRA or gold-based IRA. These are IRA accounts that work by holding precious metals for you, and in doing so, you can use them as an investment vehicle.

That’s why, today, I’ll be breaking down gold based IRA accounts for you. Not only can they be great for your retirement, but they can also be a great hedge against things like inflation. Not only will I show you how they work, but I’ll show you why you should consider an account like a gold-based IRA for your retirement.

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I’ll break everything down into easy-to-read sections, this way you can jump around to whichever information you need when you need to. I know that some of you may know more than others, so here is a look at what I’ll be going over:

  • What is a gold-based IRA
  • The regulations of a gold-based IRA
  • The benefits of a gold-based IRA
  • Final thoughts 

Now that you know what I’ll be going over, let’s dive right into the details.

What is a gold-based IRA?

I’m sure that most of you know what traditional IRA accounts are, but have you ever heard of a gold-based IRA? If you haven’t, this is definitely a section you’ll want to brush up before moving any further. Let’s take a look.

What is a Gold based IRA account?

Gold-based IRA accounts are precious metals IRAs that are referred to as gold IRAs. These accounts are designed to hold IRS approved materials like bullion, bars, and other valuable gold holdings. This is how a gold IRA account holds value, and how it works in a tax-deferred way.

How to invest in a gold-based IRA

Investing in a gold-based IRA is almost as simple as investing in any other type of IRA. The main difference here is that gold-based IRA accounts tend to be self-directed IRA accounts, which means that you’ll need to use a trust or custodian to manage the bullion for you. This is due to the fact that you can’t physically hold gold yourself, so you need a middleman man to store the funds for you.

Think of a custodian as a firm that holds money for you when you can’t yourself, almost like a financial advisor.

Once you find a custodian, you’ll need a broker to purchase the actual gold bullion or bars. There are plenty of brokers out there, but always be sure to check for the top-ranked firms. You also have two options when it comes to investing in a gold-based IRA, and both aren’t extremely complicated.

The first method is to utilize a 401k rollover into a gold-based IRA. This is when you take some of your own funds and roll them into a gold-based IRA. To accomplish this, you’ll need to find a broker and custodian. Then, once you know where you’ll be investing, you’ll need to contact the firm that has your 401k. From there, the process is as simple as signing a few pieces of paper.

Even if your 401k is held through your employer, you should still be able to view and contact the firm holding the funds. If you don’t have access to this information, I would recommend reaching out to your employer.

The second method is to use cash on hand to invest in gold. This method is simple, and all it takes is you visiting a firm. Keep in mind that some firms will require a minimum investment, and these can range between $100 up to $10,000. So, always be sure to shop around for one you like.

The regulations

Before I jump right into the benefits of a gold-based IRA, I want to spend some time going over how this is all regulated. So, let’s have a look.

IRS approved holdings

The first thing you need to keep in mind is that the IRS has several locations that are approved for gold holdings. This means that you’ll need to store your gold in one of these locations, because if you don’t there can be some serious penalties and fines.

If this is concerning you, don’t panic, because a good gold IRA firm can help.

Custodians and trusts

A gold-based IRA is a self-directed account, which means that it requires manual management. This is due to the fact that gold will be a physical asset, and it’s not something that you can exactly keep in your home or vault. This is why a custodian or trust is necessary because the IRS requires that you don’t hold the gold yourself.

You’ll still own everything, and have the rights to the accounts, it’s just that someone else has to manage it for you.

The benefits of a gold-based IRA

A gold-based IRA comes with a lot of different benefits, and all of them are definitely helpful. Protecting your money, and using it to create wealth should always be a priority. So, in this section, I’ll go over a few key reasons as to why gold can be a great asset for you.

Portfolio diversity

When it comes to investing, you’ve probably heard all about diversifying your portfolio. Everyone talks about it, and to be blunt, it’s preached for a reason. This is due to the fact that making sure you spread your money out across different assets can help protect it in case of a market collapse.

Since gold works against the dollar, and increases when the dollar decreases, gold is a great way to make sure some of your wealth is safe.

Retirement

An IRA account is designed for retirement. They have tax benefits that make them very desirable, and they can make sure your wealth grows without being touched. Gold is a great asset to invest in for your retirement, and the withdrawal process is the same.

Hedge against inflation

A gold-based IRA can also be used as a great hedge against inflation. Remember when I said gold grows when the dollar regresses? Well, this is exactly what makes gold a fantastic tool to work against inflation. If the dollar loses value over time, the value of your gold will go up. Makes sense, right?

These are just a few benefits of a gold-based IRA. Depending on what you’re looking to accomplish, I’m sure gold can help.

Final Thoughts

I know that I went over a lot, but a gold-based IRA is not an account or investment that you should take lightly. This is an investment vehicle that you should carefully consider because it can preserve and grow your wealth. So, if a gold IRA is something you haven’t yet considered, now might be a great time.

A gold-based IRA is a great way to diversify your portfolio, protect your retirement, and even prevent inflation from eroding your funds away. While it may seem like it’s a stretch, trust me, a gold-based IRA is easy to get started.

Now that you know the facts, and how gold based IRA accounts work, what will you do?

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Frequently Asked Questions

Can my IRA hold anything other than gold?

Yes. Your new precious metals IRA is self-directed, and you have the authority to invest into any assets that you want. You don’t have to just allocate your funds to gold and other precious metals, you can also put them into stocks, cash accounts, mutual funds, and more. There are also other gold related investment products that you can invest your funds into.

Can my existing IRA be rolled over?

Yes, funds from an existing IRA can be rolled over to a precious metals IRA and you can do this as often as you want without having to pay penalties or taxes. You will simply need to set up the new IRA and then authorize the transfer of funds. Typically, the custodian of your new IRA will handle this and will work with your existing custodian to work out the transfer of the funds. IRA rollovers are subject to time limits and other restrictions and you may have to report it to the IRS. In order to avoid complications, be sure to get tax advice before you start the rollover process. Also, you can invest in gold with your 401(k).

What is the difference between a traditional a self-directed IRA?

A traditional IRA is controlled by a custodian or trustee. You must allow them to direct your funds into investments that they deem to be worthy. A self-directed IRA is where you get to choose where your funds are invested. You don’t have to follow the decisions of a custodian or trustee. The main benefit of the self-directed IRA is that you get to choose from stocks, bonds, precious metals, mutual funds, CDs, or other IRA-compliant investments.

How can I invest my IRAs into precious metals?

As long as your IRA is self-directed, you can simply direct some of your funds into precious metals. Most commonly, you can invest in palladium, platinum, silver, or gold. However, you must know that any precious metal, whether it be in coin or bullion form, must meet certain requirements of purity and refinement.

Can my existing IRAs be used to invest in precious metals?

Typically, yes. However, the final decision is left to your current custodian or trustee.

Is it OK to have more than one IRA?

Yes. There is no limit on how many IRAs you can have at once, but there are limitations on the total amount you can invest annually into IRAs. In December 2011, if you were under 50, you can contribute up to $5,000 per year in all IRAs. If you were over 50, you can invest up to $6,000 per year.

What is an IRA?

An IRA, or Individual Retirement Account, is a savings plan for your retirement that has been designed specifically to provide tax advantages to individual investors such as tax-free or at least tax-deferred growth of earnings. There are several different types or IRA accounts- all of which have different rules that govern the mimimum withdrawal age, annual limits on contributions, and others. Most commonly, IRAs are used to supplement an employer’s 401(k) account and typically will be the majority of your investment portfolio.

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