Common questions about Individual retirement accounts
1) What is an IRA?
An Individual Retirement Account (or “IRA”) is a retirement savings plan designed specifically to provide tax advantages to individual investors. There are several different types or IRA accounts- all of which have rules that govern the minimum withdrawal age, annual limits on contributions, and others. IRAs are usually used to supplement your 401(k) account and will typically be the majority of your investment portfolio.
2) How many IRAs can I have? Can I have more than one?
Yes, you can have more than one Individual Retirement Account. There is no limit on how many IRAs you can have, but there are limitations on the total amount you can invest annually.
3) Can my existing IRAs be used to invest in precious metals?
It’s likely. Please consult your current custodian or trustee.
4) Can I invest my IRAs into precious metals?
Yes. As long as your IRA is self-directed.
5) What is the difference between a traditional a self-directed IRA?
A self-directed IRA is where you get to choose where your funds are invested. The benefit of self-directed IRAs is that you get to choose from bonds, stocks, precious metals, real estate, mutual funds, CDs, or other IRA-compliant investments.
6) Can my existing IRA be rolled over?
Yes, funds from an existing IRA can be rolled over to a precious metals IRA without any penalties or taxes. Just set up oyur new IRA account and authorize the transfer of funds. The custodian of your new IRA will handle this and will work with your existing custodian to work out the transfer of the funds.
IRA rollovers are subject to time limits and other restrictions and you may have to report it to the IRS. In order to avoid complications, be sure to get tax advice before you start the rollover process. Also, you can invest in gold with your 401(k).
7) How long does the rollover into gold take?
The amount of time it takes to roll-over your IRA into gold depends on a wide variety of factors. Your Gold IRA custodian will work with your current IRA custodian to get the transfer completed as quickly as possible.
8) Can my IRA hold anything other than gold?
Yes. Your new precious metals IRA is self-directed, and you have the authority to invest into any assets that you want. You don’t have to just allocate your funds to gold and other precious metals, you can also put them into stocks, cash accounts, mutual funds, and more. There are also other gold related investment products that you can invest your funds into.
9) Can I use cash to open a new IRA?
Yes, but know that you will only enjoy tax benefits on the first $5,000 if you were under 50 in 2011, and $6,000 if you were over 50.
10) How much is typically invested in precious metals IRAs?
Typically, investors will invest around $10,000 to $25,000 in precious metals. However, typically these IRAs have been accumulating for quite some time and some investors will invest $100,000 or more in precious metals.
11) What happens when I buy precious metals?
Your precious metals that you purchase with your IRA will be stored in an IRS-approved depository that is specifically designed to store precious metals. These depositories are secure, but you will be able to easily access your metals when you want to take personal possession of them.
You will be liable for any penalties and taxes if you do decide to take personal possession of your metals, because the IRS does see this as distribution of funds.
12) Can I store my IRA assets personally?
One of the main reasons that you avoid any penalties and tax liabilities is that your precious metals IRA is managed and stored by a third party. When you take personal possession of your IRA assets before the minimum age that is specified, the IRS will classify that as a distribution and you will have to pay taxes and penalties. You will also have to report that distribution to the IRS.
13) What is the difference between a trustee and a custodian?
The terms “trustee” and “custodian” are often interchanged, however there are a few differences in their definitions.
A trustee is the person that has control and authority of assets that are held in a trust, but must always hold the best interests of the beneficiary first and foremost and therefore must exercise their authority of the trust accordingly.
The only role of a custodian is to hold and manage the assets on behalf of the owners. A custodian has no obligation to the owner other than safe and secure storage of the assets and following the instructions of the owner of said assets.
Typically, the law in each state will define the specific obligations of a trustee and custodian.
14) What precious metals can be held in my IRA?
There are specific and strict rules that govern the types of precious metals that can be held in a precious metals IRA. However, the basic rules to qualify as an IRA asset are:
- Gold must be .9950 pure
- Silver must be .9990 pure
- Platinum and Palladium must be .9995 pure
When it comes to physical forms, only bullion bars manufactured by NYMEX, COMEX or ISO 9000 approved refiners qualify. Also, proof coins must be in the original packaging and have a certificate of authenticity from the manufacturer. Examples of qualifying coins are:
- Canadian Maple Leafs
- American Gold Eagles
- Austrian Philharmonics