Setting up your gold IRA account requires you to have a Self-Directed IRA account as mentioned in our Gold IRA Investing section.
A self-directed IRA (Individual Retirement Account) is a structured investment account that places the investment decisions on the investor or account holder, or who directs those investment decisions to a trustee. The rules of a self directed IRA are made by the IRS similar to regular IRA accounts and 401Ks.
There are certain requirements that come with a self directed IRA that must be met in order to maintain the account. First, a custodian (usually a bank or financial institution), must hold and segregate the investments separate from its funds. The custodian’s job is to maintain your assets in a secure manner, provide you with the necessary paperwork and reports to help maintain your self directed IRA and to understand the rules and how the account works, as well as to file all required reports with the IRS to keep your account in compliance.
While most custodians can offer a variety of allowable investment options that qualify for a self directed IRA, most investors choose to make investments outside the typical investments such as stocks, bonds and mutual funds, which is usually why they chose to take the self directed IRA route to begin with. The Internal Revenue Service (IRS) allows a wide variety of investments that can go into a self directed IRA, however, there are also several types of investments that are not allowed.
The IRS prohibits investments in life insurance and in collectibles such as artwork, rugs, antiques, gems, stamps, alcoholic beverages (ie: wine collection) and certain other tangible personal property. However, the IRS does allow certain types of precious metal bullion and coins minted by the United States Treasury – which brings us to your gold IRA account.
One of the biggest benefits of the self directed IRA is the wide array of investments it does allow. Going beyond your traditional investments provides you with diversification that you could not obtain in your regular IRA account. For instance, real estate held in the US and internationally is allowed and includes many types such as raw land, commercial, new construction, passive rental real estate, residential, mortgages, farmland, and the like.
In addition to real estate, other allowable investment types include franchises, partnerships, start-ups, hedge funds, commercial paper, United States treasury Bills, and practically any type of for-profit business that is managed by someone else qualifies to be used in a self-directed IRA. Having the flexibility to go beyond stocks, bonds and CDs and not being locked into banks and brokerage firms is by far the best feature of this special type of IRA.
Investing in Precious Metals
A common use of self-directed IRAs is that they can invest in precious metals such as gold, silver, and platinum. Most government minted coins from both the United States and most other established countries such as Australia, the United Kingdom, Hong Kong, and China (American Eagles, Australian Nuggets, etc.) are permissible. Precious metal bullion is also allowed if it meets certain levels of fineness (typically .999 or 99.9% or better), and is produced by a COMEX or NYMEX approved refiner. In addition, for coins to be held inside an a self directed IRA, they too must also meet a certain level of pureness in their precious metal content. When a self directed IRA purchases precious metals as an investment, the coins and/or bullion must be held by a third-party custodian.
Working with a Custodian
Traditional custodians, which are usually banks and brokerage firms, may not be very receptive to a self directed IRA, particularly being that they do not hold typical investments such as stocks, bonds, or mutual funds. However, investing in precious metals requires you to use a custodian who puts your best interests and the safety of your investment as a first priority.
If you have a traditional IRA or a Roth IRA and your current account custodian does not allow or manage self directed IRAs, you can rollover or transfer your account into a self directed plan without any penalties by working with a custodian that does and specializes in managing these types of accounts. In addition, transferring your account does not require you to sell any of your assets – even old 401(k) accounts can be transferred over.
One of the primary responsibilities of the custodian is to maintain your account so it remains compliant with IRS regulations. When you open a self directed IRA, your relationship with your new custodian is very important as they become a financial partner that holds your investments. In addition, being that they charge fees for their various services, which you will typically pay for annually, choosing a professional and well managed custodian is very important.
Every time you choose to make an investment with your self directed IRA, its always best to check first with your custodian that it is allowable and fits within the regulations of the IRS. Since you are paying the custodian for their services, it is worthwhile to have their involvement when making an investment decision and also helps to tap into their expertise and years of experience. Lets also consider that cheaper is not always better – experience and professionalism usually come at a premium and when it comes to your investments, it usually makes sense to work with someone that knows what they’re doing regardless of the small incremental cost.
Conducting certain transactions with your IRA can render it null and void and put you on the hook for all income taxes owed. Examples of some of the transactions that can disqualify your self directed IRA include:
- Borrowing money from it.
- Selling property to it.
- Receiving compensation for managing it
- Personally guaranteeing an IRA loan
- Using it as security for a personal loan.
- Buying property for personal use (present or future) with IRA funds.
So work closely with your custodian and make sure they are staying on top of all the current rules and regulations mandated by the IRS so you stay in compliance.
Make it easy on yourself and work with a trusted Gold IRA Company that has been doing this for years and has helped thousands of people. Call our toll-free number today (885-485-0088) for a private consultation with a Gold IRA professional to find out more and to get a Free Gold Investor’s Kit.
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