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The only thing certain about life is its uncertainty, and while you can’t predict the future, you can prepare for it. Whether you’re just starting out in the workforce or are a seasoned expert, it’s never too early (or too late) to prepare for your retirement. One way you can plan for your financial future is by opening up a gold IRA.
If you’re wondering how to fund a gold IRA, you’re not alone. Many people have questions about what a gold IRA is, how it works, and how to fund it.
A gold IRA works like any other individual retirement account, but instead of holding stocks or bonds, it holds physical gold. In this guide, Oxford Gold Group explains the process of funding your IRA with precious metals.
Understanding IRAs
Before diving into how to fund your gold IRA, it’s important to understand how individual retirement accounts work. A traditional IRA allows you to prepare for retirement and save for the future by investing monetary contributions in the account, which your custodian then invests in the stock market on your behalf. With a gold IRA, your account holds physical IRS-approved gold, whether it be coins or bars. A gold IRA can balance your retirement portfolio, and when you retire, you can withdraw gold from the account and sell it.
Not all traditional IRA custodians offer gold retirement plans, so you may need to find a separate custodian for your gold investments.
Once you decide to open a gold IRA, you need to choose between the two account types:
- Traditional gold IRAs: With this account, you can buy gold with pre-tax dollars and only pay taxes during distribution.
- Roth gold IRAs: With this account, you buy gold using post-tax dollars, which means you don’t pay taxes later at distribution.
Options for Funding
Funding your gold IRA is easy. You have three main options for doing so: transfers, rollovers, and direct contributions.
Transfer From Another IRA Account
If you already have another individual retirement account, you can ask your custodian to transfer funds from that account directly to your gold IRA. You can do this with multiple types of retirement accounts, including:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- Roth IRAs
What makes this process even easier is that you can do it as many times as you want without worrying about tax penalties.
Rollover From Your 401(k) and Other Accounts
When most people learn how to fund a gold IRA, they often prefer to roll over their 401(k) funds. This method allows you to fund your gold individual retirement account while working by moving over certain assets from your existing 401(k) or other qualified accounts.
For example, you can rollover funds to your gold IRA from the following types of accounts:
- 401(k)
- TSP
- 403(B)
- 457(B)
- Pension Plan
- Tax-Sheltered Annuities
Make Cash Contributions
If you don’t have any other retirement accounts or don’t want to transfer any funds, you can make cash contributions to your gold IRA. Making cash contributions is as easy as using a checking or savings account to fund your gold individual retirement account.
The only catch here is that making cash contributions comes with certain limits. As of 2023, you can contribute up to $7,500 annually if you are over 50 and only $6,500 if you’re under 50.
Transfer and Rollover Process
Transferring your funds from your previous retirement account to your gold IRA is relatively simple since your custodian does it for you. However, when you use the rollover method, you have to decide whether you want to do it directly or indirectly.
With a direct rollover, your plan administrator moves the funds for you tax-free. This method may be preferable if you’d rather have someone else transfer the funds for you.
Meanwhile, an indirect rollover uses you as the middleman. That means that you’re responsible for withdrawing funds from your 401(k) and depositing them into your gold IRA. You can do this tax-free as well, but only if you do it within 60 days of opening the account. You can also only do this once a year.
Investment Considerations
You have several things to consider when learning how to fund a gold IRA. In addition to the funding method and type of IRA, you also need to consider how your custodian will handle your investment.
If you already have a retirement account, you likely have a custodian who helps manage your investment assets. If your current investment institution doesn’t offer precious metals retirement accounts, you’ll have to find a custodian who does. Finding a reputable gold IRA custodian is crucial for protecting your assets and complying with IRS regulations for gold IRAs.
Generally, you have to store your gold in an IRA facility, which your custodian will assist with. These facilities have high-end security protocols to keep your investments secure. If you want to store your gold at home, you may want to think twice.
The IRS requires all gold IRAs to have a qualified custodian. The only way you can store your gold at home is by going through the rigorous process of becoming a custodian. However, if you take this route, you may end up facing significant tax penalties.
Costs and Fees
IRAs come with fees regardless of the account you want to open, so it’s crucial to know what you’ll have to pay before embracing a new investment vehicle. For instance, since gold is a physical asset that sits in your IRA, you will have to pay storage fees on top of the custodial fees, which are typically around $180 annually. To put this into perspective, an annual $180 storage and custodial fee is 2.8% of an account with $6,500 worth of gold.
Making cash contributions to your gold IRA subjects you to a lower contribution limit, which makes this fee more significant. Meanwhile, rollover IRAs can start at $25,000, which makes this $180 fee a smaller percentage of your investment.
Role of IRA Specialists
IRA specialists have in-depth knowledge of how different IRAs work. With so many types of individual accounts available, it can be difficult to understand how each one works and which is best for your financial and retirement goals.
An IRA specialist has certifications that reflect their knowledge of the subject. To receive their certification, IRA specialists must take and pass the Certified IRA Specialist II exam.
They can help you better understand contributions, distributions, rollovers, and transfers to help you monitor your investments for growth. They can also help you during claims and withholding processes.
Learn More About Gold IRAs With Oxford Gold Group
Any person who invests in precious metals knows that there’s a learning curve. Fortunately, you don’t have to go at it alone.
Our team at Oxford Gold Group helps people prepare for retirement by guiding them through the gold IRA process. From opening an account to finding a qualified precious metals dealer, we’re here to help you every step of the way.
Whether you’re just starting to learn how to fund a gold IRA or are looking to expand your portfolio, you can rely on our team of professionals to act as your guide. Schedule a call to connect with Oxford Gold Group and start preparing for a better financial future today.
