In today’s world that demand is being pushed much higher by investors in emerging markets particularly China and India. Many people today consider having physical gold in IRA a wise decision and it is becoming an ever more popular option.
Procedure for investing in gold IRA
Though it cannot be said to be rigorous, the process of putting physical gold in IRA is a bit harder than that of using paper assets. Not all IRA custodians handle investments in gold hence the first step should involve finding one who offers this option. You may have to open a separate account if you wish to invest in physical gold, a step that involves some paperwork as well payment of some fees. When this is done, you put money in your account and give instructions to the custodian on what you wish to buy. Note that there is a fee charged by the custodian either on a fixed amount basis or as a percentage of total investment. As with other traditional IRA’s you can add the same tax deductible yearly contributions into your gold IRA with the limit capped at around $5000 per year. When you need to withdraw your gold, your custodian will sell it for you and you get the cash from the sale, subject to normal income tax rates.
Advantages of Gold IRA’s
- As mentioned earlier gold is a very reliable store of wealth since its monetary value is not affected by external factors. Prices of gold and stocks of gold mining companies have been rising even when stock markets were crashing under the weight of the recent economic downturn.
- If you have a self directed IRA it is possible to take possession of your gold at anytime the need arises. You also have complete control of your funds and can change as much of your IRA cash into gold as possible. If what you have is a Roth IRA account you must first transfer or roll over the assets into another type of account before you are able to invest on gold. The same condition applies for some other traditional accounts.
- Most IRA trustees accept investment in form of gold and are actually allowed to rollover some of your IRA assets into gold subject to some charges. If your current IRA company does not allow you to hold gold you can always find a new one that does. There is no limit to the number of IRA’s you can have.
Disadvantages
- A gold IRA is unlikely to earn you a huge profit in the short term. Although the price of gold tends to maintain an upward trend the rise in price is usually at a slow steady rate over many years. If you intend to grow your investment significantly over a few years, this isn’t a very viable option. It is more appropriate as a means of preserving your savings and wealth for the long term since it is likely to retain keep their value stagnant.
- Safe storage of physical gold may prove to be a logistical hurdle. You may have to lease safety a deposit box from a bank or a licensed gold custodian. You may also be required to take out an insurance policy for it. All these demand occasional payments that diminish your original investment. If you decide to withdraw your gold from your account to keep it at home then the IRA trustees withdraw their liability for it.
- The risk of losing your savings though reduced is still present especially if you have invested in the stocks of a gold mining company. Though this is more likely to earn profits in the short term, it harbors greater risk since their operations are generally located in politically unstable countries where the chances of certain socio-political events interfering with operations are higher.
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