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People often prepare for their future by investing in a retirement fund like an IRA or 401(k) using money. Gold is another way to protect your financial future because it has a long-standing store of value and offers some protection against inflation. If you are interested in diversifying your investments, including that precious metal in a gold IRA could be an ideal asset.
A particular individual retirement account is necessary to invest using physical gold. You might wonder who holds the gold in a gold IRA. Here, we have a detailed guide to help you understand who retains the gold in a gold IRA and everything else you need to know about these specialized investment accounts.
What Is a Gold IRA?
A gold IRA account is a self-directed IRA that allows you to own physical gold. Personally owning and possessing gold bullion is not allowable with standard individual retirement accounts. However, you could invest in assets that have exposure to the metal, such as gold exchange-traded funds or EFTs.
People choose to open self-directed IRAs because they want to invest in alternative assets, such as real estate, physical precious metals like gold and silver, and cryptocurrencies. Though a gold IRA account has the same tax rules, contribution limits, and withdrawal requirements as traditional and Roth IRAs, gold IRA accounts have additional tax reporting and record-keeping requirements.
The Growing Trend of Gold IRAs
People tend to open gold IRA accounts to diversify their retirement portfolios. Shifting away from paper assets gives investors a form of insurance against inflation. Gold IRAs were not always popular due to their complex transaction requirements.
Opening an account requires you to secure a custodian or trustee for the IRA with access to an approved depository. Once you have a trustee, you will need to purchase approved gold and transport it to the storage in a way that makes it easy for the custodian to track and record the transaction.
The trend of owning gold rose after the Great Recession in 2008. It continues to climb today because of the Federal Reserve’s stimulus programs and their risk of influencing inflation.
Special Risks of Investing in Gold
Investing your retirement funds with a gold IRA is beneficial, but it is not without risks. Despite gold having a 5,000-year history as a form of exchangeable currency, it is volatile. The metal’s price can go up or down at any time, which affects the price of paper money.
A diverse portfolio with alternative assets like gold often balances out the drop in paper-based investments due to inflation. However, gold IRAs rely on the ownership of physical gold, which is has a high-theft risk. It’s also possible to put your account in the hands of an inexperienced or untrustworthy custodian who sells or mismanages your precious metals.
You can mitigate the risks of having a gold IRA account by choosing the best custodian possible to protect your financial transactions.
Who Holds the Gold in a Gold IRA?
You may feel more comfortable handling your gold IRA account alone, but you require the assistance of a qualified trustee who specializes in gold IRAs. Custodians are essential for your investment endeavors into precious metals because they understand how to take care of the paperwork and tax reporting requirements for your gold transactions and retirement planning.
In most cases, custodians are trust companies, banks, brokerage firms, savings and loans associations, and other financial organizations with state or federal approval. They would be responsible for setting up the account and buying your gold.
Custodians are also essential for holding the physical gold bullion in their approved storage facilities. According to the IRS, you cannot keep physical gold in your possession if you have a gold IRA. Otherwise, the Internal Revenue Service will consider the gold you have as a withdrawal from your account, which will incur withdrawal penalties and taxation.
Owning a gold IRA account requires you to store approved gold in a national depository, bank, or third-party trustee with IRS approval. A trustee can refer you to a secure storage facility and control the transfer of precious metal when they set up your account.
How to Find a Broker or Custodian for Your Gold
Because a custodian is required to manage your physical precious metals for your self-directed IRA, it’s crucial to select the best institution for the job. Though the trustee will not choose your metal dealer, they are responsible for facilitating your gold transactions in and out of your account, as well as storing the bullion.
It takes substantial research to determine which brokerage firm or bank to manage a gold IRA. Here are some essential criteria to consider during your search:
- Track Record: Any company you hold responsible for managing your retirement investments should have an excellent reputation among objective third parties like the Business Consumer Alliance.
- Flexibility: Your financial objectives may differ from others, so it helps to work with an organization with enough flexibility to accommodate your goals and investment needs.
- Qualifications: All reputable financial institutions will have required insurance, registrations, bonds, and licenses to protect your investments.
- Transparency: It helps to know your upfront costs so that you can prepare for the charges your gold investment will generate.
When You Can Access Physical Gold from the Gold IRA
Though you cannot hold the physical gold belonging to your gold IRA, you can make withdrawals. To avoid a 10% penalty, you must be at least 59.5 years old to withdraw from your account. You can choose to take possession of your precious metal investments or obtain cash by liquidating your assets.
Benefits of Investing in a Gold IRA
Gold IRAs are an excellent way to protect your financial future. With this type of account, you can enjoy the following benefits:
- Investment diversification
- Protection against economic downturns
- A Barrier against inflation
Types of Gold You Can Own in a Gold IRA
Not all gold is acceptable for an IRA. Gold coins and bullion are the only options, and they must meet these requirements:
- All investment gold should have 99.5% purity.
- Gold bars must be manufactured to the exact weight
- Companies producing or distributing gold must have national accreditation.
- Gold coins must be in their original, undamaged packaging.
- All invested gold should have a certificate of authenticity.
- All gold coins must be uncirculated and free of damage.
Gold IRA FAQs
Do Gold IRAs Come with Special Expenses?
Yes. Investing in gold through an IRA generates several expenses, including a seller’s fee or markup. A markup is a one-time fee with varying amounts depending on whether you prefer to own gold proofs, bullion, coin, or other forms of physical gold.
You are also responsible for the retirement account set up and custodian fees. The former expense is a one-time fee that your custodian will charge to your gold IRA account. The latter is an annual expense that could be higher than other IRA accounts.
You will also need to pay storage fees for containing your physical gold. The precious metal must be in a qualified storage facility, which will incur expenses.
Do You Need a Gold IRA to Make Gold Investments?
Though you can certainly use your retirement funds to invest in gold through a gold IRA, it’s not necessary. Instead of buying physical bullion or coins, you could turn to gold stocks through royalty companies that finance gold mines. As the price of gold increases, these companies tend to yield higher profits, which often translates to a rise in their share prices.
Another option is to set up a gold mutual fund. A gold mutual fund can indirectly or directly invest in gold reserves through physical gold purchases, mining company stocks, and gold distributing syndicates. However, if you prefer owning physical gold, a self-directed gold IRA is necessary.
How Can You Fund a Gold IRA Account?
After choosing a custodian to manage your gold IRA account and handle your IRS reporting, you must fund your account. Self-directed gold IRA accounts have a maximum annual deposit of $6,000 or $7,000 for investors over 50 years old. You can add funds in three ways:
- You can wire payments or send a check to invest cash into your IRA account.
- You can withdraw funds from your current retirement account to deposit into a gold IRA within 60 days of the initial withdrawal.
- You can contact an administrator for your existing retirement account to transfer a selected amount of your money to your new IRA custodian.
Call Oxford Gold Group to Invest in a Gold IRA Account Today
Now that you know who holds the gold in a gold IRA, now is the perfect time to take control of your financial future with a gold IRA account. At Oxford Gold Group, we have the expertise to help first-time and seasoned investors convert existing IRSs and 401(k)s into gold and access gold at affordable rates.
Contact our team today at 833-600-GOLD to learn more about investing in a gold IRA account.