Easily convert your IRA into a Gold IRA
Investors are facing several significant risks in 2022:
- Inflation is at 40-year highs and continues to rise
- Interest rates are rising sharply on both the short and long end of the duration curve
- Supply chains are strained across the planet
- Geopolitical tensions are mounting as global superpowers square-off and take sides
With all of these crosscurrents happening at the same time conservative investors are seeking safety for their retirement savings.
Unfortunately, the current economic environment is unprecedented for most investors because they weren’t adults during the 1970s. They don’t understand how Inflation and rising interest rates represent a double-whammy for both Stock and Bond markets.
The traditional 60/40 Investment Portfolio is intended to balance risk and reward based on the assumption that when Stocks are falling, Bonds will rise. Unfortunately, that assumption is not valid during current economic conditions.
With the exception of Precious metals, all of the Financial markets have become correlated bubbles due to massive central bank money creation. The markets have inflated based on money printing, not fundamental factors supporting organic growth.
Some financial analysts refer to the current investing world as the “everything bubble” and they discuss possible pins that could cause the bubble to pop.
Alternative Investments
To protect their retirement savings conservative investors are exploring alternative Investments like Precious metals and Real Estate.
Real Estate tends to act as an Inflation hedge but investing successfully in rental property, whether it is residential or commercial, requires specialized knowledge in order to succeed. Most investors should avoid rental properties and limit their Real Estate Investments to just a primary residence for themselves and their family. Rising interest rates are a significant risk factor in current Real Estate markets, both residential and commercial. This is another reason for investors to be cautious with Real Estate.
Precious metals offer two levels of hedging:
- 1They hedge against Inflation by rising in price as Inflation erodes Purchasing Power. This is exactly what happened during the Inflation of the 1970s.
- 2They act like an insurance policy against economic turmoil whether it is caused by collapsing Financial markets or geopolitical tension which escalates into outright conflict.
Gold IRA vs physical Gold
There are at least two ways to convert your IRA to physical Precious metals.
The first method is to take a distribution from your existing IRA. If you do that you will pay a 10% early withdrawal penalty (if you are under the age of 59 1/2) and then pay income taxes on the distribution based on your existing tax rate. After giving the IRS their share of your retirement savings you can then use what’s left to purchase Gold bullion bars and Coins at a local Coin shop.
The second method involves moving some or all of the funds from your existing IRA into a self-directed IRA which holds physical Gold.
The significant difference in a Gold IRA vs physical Gold is whether pre-tax or after-tax funds are used to purchase the metal.
Ideally a Precious metals Portfolio is built on a foundation of physical Silver and Gold purchased with after-tax money. To do this with an existing IRA you have to close the IRA and suffer the tax consequences mentioned above. This doesn’t make sense for most investors.
The alternative is to use the tax-advantaged funds from the existing IRA to purchase physical Gold and Silver inside an appropriate self-directed IRA.
How does a Gold IRA work
When you decide to transfer some of your retirement savings into a Precious metals IRA the process is relatively simple.
If you are a DIY investor you can probably walk through the steps on your own.
All of the Gold IRA companies have IRA Specialists who will walk you through the transfer process and provide as much or as little help as you want.
Step 1
The transfer process starts when you open a Precious metals IRA account with the Investment management company of your choice.
Like all financial accounts, opening the Gold IRA account will involve a little bit of paperwork that can easily be handled online.
Step 2
Now that the Gold IRA account is established you can contact the administrator of your existing IRA account and request a transfer.
The administrator will clarify with you whether you want to perform a rollover or a transfer.
In a rollover the funds are wired directly from one account to the other. The investor never receives the funds as a distribution.
In a transfer funds are distributed from the IRA to the investor and the investor then sends money to the Gold IRA company.
The investor has 60 days to deposit the distributed funds into the new account or the IRS treats the money as regular income and imposes a 10% early withdrawal penalty on investors under the age of 59 1/2.
Unless you want to withdraw some cash from your IRA and pay the taxes and penalties on that cash, it makes a lot more sense to do a rollover. With a rollover the 60-day IRS rule never comes into play and you will not be subject to any taxes or penalties.
After determining whether you want a rollover or a transfer your IRA administrator will have some paperwork for you to complete to get the process started.
Step 3
This is the “hurry up and wait” stage while money is transfered from one account to another or distributed directly to you.
A wire transfer from your IRA to the Gold IRA should be completed within 72 hours.
If you are receiving a distribution the overall process may take longer.
Step 4
After the Precious metals IRA account has been funded you will be able to select the specific bars and Coins you want to hold in the account.
When you are picking from the products offered by the Gold IRA company, always get the most metal for the least amount of money.
This means you want bullion products and you do not want proof Coins, Numismatic Coins, or special edition Coins.
Gold is Gold.
It does not matter whether an ounce of Gold is a shiny proof American Eagle (with a certificate of authenticity, oh boy!) or a scratched-up Maple Leaf – they are both worth one ounce of Gold.
Any premium paid for proof, Numismatic, or special edition Coins is money wasted if your focus is strictly on making a good Investment.
If you want to purchase pretty Coins because you enjoy looking at them, keep in mind that the Coins in your Gold IRA will be held by a third-party Custodian.
You won’t see these Coins until you receive them as a distribution during your retirement. And if you take cash distributions from the account the Coins will be sold and you will never see them in person.
Home storage Gold IRA
There are claims on the internet that investors can store physical Gold at home in an IRS-approved IRA.
The strategy being suggested is that the Investor set up an LLC to act as a third-party Custodian for their IRA. This third-party Custodian holds Precious metals on behalf of the investor and elects to store those metals in a safe in the investor’s home.
This strategy involves a great deal of risk because the IRS may disallow the IRA account when it is distributed.
Instead of appreciating the benefits of a Gold IRA you could end up paying back taxes and penalties assessed by the IRS. On top of that you could be taxed at the 28% rate for collectibles regardless of your current tax rate.
Be very careful if you decide to pursue this Investment strategy.
Benefits of Gold IRA
Gold IRAs provide a way for investors to own physical Precious metals using tax-advantaged funds. That is the primary benefit of a Gold IRA.
Gold IRAs have the same tax benefits as traditional IRAs holding Stocks and Bonds.
The key difference between the two IRAs is that when we take a distribution from our Gold IRA we can choose to distribute either cash or the physical Precious metals. If we want to we can have our metal shipped to us or go pick it up ourselves.
Distributing physical metal from the Gold IRA is a unique benefit for investors who don’t need cash. The distributed metal can then be gifted to your recipients of choice (following IRS rules for gifting, of course), passed-on to your beneficiaries, or sold as needed for income.
In summary
The process of converting an IRA to a Gold IRA is relatively straightforward and it can easily be accomplished by most investors.
To make the process go smoothly you make these decisions ahead of time:
1. Do you want to perform an account rollover or do you need to do a transfer?
2. Which Precious metals products will you hold in the Gold IRA?
With these decisions made the Specialists at your Gold IRA company will help you convert your IRA to Gold.
About Satori Traders
Satori Traders LLC is a California-registered Investment Advisor specializing in the Precious metals.
Bryan V Post is a California-registered Investment Advisor Representative and the founder of Satori Traders.
Bryan has worn numerous hats during his life: Engineer, Portfolio manager, Precious metals Investor, Technical analyst, Proprietary trader, Swing trader.
Satori Traders 