Gold IRA Rollover: Rules And Regulations Explained

For thousands of years, gold has always been a nice thing to have. It is valuable, durable and rare. Financial advisors and other experts of our time are just now realizing how this precious metal can protect against currency debasement, inflation and economic insecurity. Currently there’s a certain rush to invest in gold especially as a solid backup plan for retirement years in case all other investment options such as stocks, bonds or real estate fail. However, before you turn your Individual Retirement Account (IRA) into a gold IRA, you need to know what it entails, and where better to start than learning the rules and regulations governing this investment.

What is an Individual Retirement Account?

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In basic terms, an Individual Retirement Account is a tax-deferred financial plan that employed workers use to save money for their retirement. The employees have to deposit a certain amount into their IRAs per month from their income. Usually, these deposits are tax-deductable, and any investment earnings from the accounts are not taxable until the point of withdrawal. The employee is not permitted to access his/her IRA until he/she turns the age of 59, unless he/she is willing to incur a penalty.

IRA and Precious Metals Investments

The Internal Revenue Service (IRS) allowed assets such as stocks, bonds, real estate, money markets and mutual funds in an IRA. Initially, the IRS prohibited precious metals and collectible coins to be part of an IRA. Fortunately, the Taxpayer Relief Act of 1997 made a few changes to these prohibitions, allowing gold and a number of other precious metals to be part of IRAs. Even so, you still have to abide by certain rules if you wish to put gold into your IRA account to improve your flexibility and holdings.

For instance, not all types of IRA accounts allow you to roll them over into a Gold IRA. You should be fine if you have a Roth account or traditional IRA account, but to be safe, it is better to consult with your financial advisor to determine if you can rollover your specific account to a precious metal IRA. You should also want to check with your employer before investing because some employers do not permit gold investment in a 401k unless you quit your job. Even if your IRA was not originally designed to accommodate gold investment, there is a way you can go around it, but that requires the expertise of a Gold IRA Custodian. This leads us to our next point.

The Legal Role of a Custodian in the Gold IRA Rollover Process

The IRS does not allow you to hold your gold physically once you purchase it with your IRA. This means, you cannot store the gold in your safe at home or bury it in your backyard. You cannot even buy the gold yourself and hand it over to be stored in a third-party depository. Under IRS rules, doing so is considered distribution and is taxable. Nevertheless, the law allows you to appoint an authorized and dependable custodian to purchase, hold and maintain your gold IRA during and after the rollover.

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Simply put, it is the responsibility of the custodian to buy your gold from a gold dealer, to place it into your Gold IRA and to arrange storage in an IRS approved depository. The custodian you opt for should be able to provide you with all the contact information and necessary paperwork to complete your IRA rollover. Once you have all the documents in your hands, you have 60 days to transfer the money into the Gold IRA. The rollover may involve certain fees, which you should discuss with your custodian prior to the transfer. It is your call whether your custodian should buy more gold or sell, as you deem necessary.

It is crucial to pick a credible custodian for two main reasons. Firstly and obviously, it is that gold investment can make up to as much as 30 percent of your retirement assets, and you want it to be handled by someone you can trust. Secondly, the IRS allows only one tax-free IRA funds rollover per year, and this rollover of the entire agreed upon sum must happen within 60 days of removing the funds for your current IRA. If you choose a custodian poorly and want to change to another one, you have to wait an entire year to do so; otherwise, you will have to pay a penalty.

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Buying IRS Approved Gold and Finding Reputable Dealership

Perhaps the most crucial step in your Gold IRA rollover process is locating a credible gold dealer offering IRA-approved products and competitive prices:

A few years ago, your options would be limited only to your local gold retailers, who would be no more than a handful. Today, the modern gold rush has seen dealers mushroom everywhere, especially online. By shopping around online, you have more variety and more potential to save. Most custodians allow you to select the gold dealer from whom you want to buy the gold from, but some do not give you that choice to shield you from fraudulent dealers. Whatever the case, you have to know the products you are purchasing, which must be IRS approved.

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The IRS has strict regulations when it comes to the type of gold you can have in your gold IRA.

You cannot have collectible coins in your precious metals IRA regardless of their rarity. You can only have gold bullion bars or coins of a certain quality in your gold IRA. The gold bars need to be 99.9 percent pure or higher. You should only buy IRS approved gold coins such as the Canadian Gold Maple Leaf and the American Gold Eagle. Beware of gold dealers who upon making inquiry about gold, upsell other products such as “rare coins”. Such individuals are only after your money and do not have your best interest in mind. To be on the safe side, search for companies that offer a buy-back program to ensure what they are selling to you is not worthless.

Indeed, there are plenty of considerations and regulations involved in transferring from a traditional IRA to a Gold IRA. The above summary should help you get started. Even though it may seem strenuous to wrap your head around, be assured the benefits of adding gold into your retirement portfolio is well worth the effort.

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