The Definitive Guide to Understanding a Gold IRA

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Exploring a gold IRA can be very beneficial for those who have access to such a vehicle. Opening an Individual Retirement Account tied to bullion is, given gold’s price stability, a rather solid choice. This option also allows for holding more diverse investments in the account.

Opening the Door for Gold. 

The introduction of a gold IRA dates back to 1997. With the help of the Taxpayer Relief Act, IRAs could be diversified by investing in US gold and silver coins minted by the Treasury. At the time, this was a remarkable decision. Considering the position both gold and silver have in society, it was a matter of time until such a vehicle would be introduced. 

As of 1998, the rules relaxed a bit. It is equally possible to invest in platinum coins and certain gold, silver, and platinum bullion. Diversifying one’s portfolio is crucial during times of financial uncertainty. Since 1998, there has been ample uncertainty, and it is unlikely that things will improve in the coming years.

Choosing the Right Bullion

Setting up a gold IRA is only the first step. Opening the account is easy, but users have to ensure they obtain the correct bullion types to deposit. Precious metals approved by the IRs are eligible, whereas everything else will not be accepted. One interesting note is how most “collectible” coins are not deemed eligible,albeit there are quite a few exceptions. As long as the coin meets the necessary fineness, using it for an IRA will not pose any problems.

While users can hold both gold coins or bars, the choice for coins makes a lot more sense. This is primarily from a liquidation point of view. Bars are very difficult to sell, especially when talking about larger quantities or heavier units. They also bear a much higher price compared to coins, which makes it even more complicated.

The second concern is how gold bars can be counterfeited a bit easier. Although this can apply to gold coins as well, it is more common with bullion bars. This can have major consequences for both the user and the IRA provider, thus it is best to go for the safest options with the least headaches. 

The Distribution Scheme

Taking distributions from a gold IRA could be very complex, on paper. In reality, they are the exact same as any other Individual Retirement Account, which makes it all the more appealing. Account holders can opt to liquidate the IRA metals for cash, or opt for physical delivery of their existing bullion reserves.

It is worth noting this applies to gold holdings, but also all of the other supported precious metals. Regardless of which option one prefers, the end user will be taxed accordingly to their action. What the tax rates are exactly, depends on where one lives, which IRA provider is chosen, and how the local tax agency looks at these options. 

Where is the Gold Kept?

Using gold or other precious metals as part of an IRA is a valid option. For the IRA, it is pertinent to store the deposited precious metals via a trustee or custodian. This must be a bank, federally insured credit union, savings and loans association, or other entity approved by the IRS, according to IRS Publication 590.

Offering ample security features is crucial in this regard. Options can include, but are not limited to, timed locks, monitoring, vibration and motion detectors, and so forth. Every gold IRA often has a major insurance policy, depending on the amount of precious metal the users deposit over time. 

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