When someone mentions gold, what comes to your mind? For normal citizens, this precious metal can be a means of good income when sold, and for more business-oriented individuals, it can be made into finer jewelry and accessories coveted by many wealthy socialites. Even stainless steel watches, as timeless and classy as it is, had already fallen behind in demand (read more) compared to gold watches. This precious metal is a commodity with a value that rarely plummets in a crisis.
However, beyond being an ornament or a product for business, there is another better way of utilizing precious metal, and that is through investing in it. A gold IRA is just as common as a traditional IRA, if not more popular and preferred. This is because of the metal’s many attractive properties, such as being aesthetically pleasing to the eyes, being highly malleable, which can result in many beautiful pieces and its high value in the market.
Thus, the demand for gold is steadily increasing until today. Did it catch your attention to know this metal and many of its counterparts can be a stable investment? If you did, and you want to know more about IRA, retirement plans, and of course, precious metals, read on to see FAQs and top questions answered!
Question #1: What Is An IRA?
The most basic question anyone has after reading on would be this. What exactly is an IRA? It’s short for Individual Retirement Account. This is a savings account offered by many experts, financial companies, and even large employers for their employees.
It offers to direct their income pre-tax into the account (link: https://www.investopedia.com/terms/t/traditionalira.asp) and save it for retirement or investments. These investments can also be tax-deferred as it grows over time.
Although the amount they set aside inside this account is pre-tax, upon retirement and withdrawal, they will be taxed based on their current income tax rate. In the meantime, a custodian will be responsible for holding your IRA and disseminate the money into several investments. Of course, this is under the instruction and wishes of the account holder.
Question #2: What Is A Gold IRA?
This type of retirement account is almost the same as the one previously mentioned, only it invests in this precious metal and others rather than other commodities. While traditional or Roth Individual retirement accounts focus on mutual bonds, bonds, and stocks, their counterpart focuses on physical assets. This precious metal is one of those assets.
But what if you just recently found out about Gold Individual Retirement Accounts and you already have a 401k account? Well, it’s entirely possible to rollover a 401k to a gold IRA with just a few steps and assistance from the right experts. However, a problem can also arise if you’re still employed with the company that sponsored your 401k, as it’s very unlikely you’ll get permission to move your assets.
Question #3: What Is A 401k Account?
Those who are knowledgeable about what a 401k account is may skip to the next question. However, for the benefit of those who are still scratching their heads with the terminologies, we’ll be defining what this account is compared to traditional/Roth and gold IRA.
A 401k account is a savings plan for employees working for a large company or corporation. It is mostly given by said company or corporation as mandatory for their employees, as a part of their comprehensive employment package. This account works as a plan that safeguards a portion of their money and invests it before it becomes taxed. It sounds just like a Roth or gold individual retirement account; only this plan is only applicable when you’re employed.Question #4: Why Do People Choose Gold IRA?
You might wonder why a lot of people prefer this type of retirement account to Roth or traditional, and one reason might be because of its stable nature. Stocks, bonds, and mutual funds don’t have any physical solidarity to assure investors they’re as real as their invested money. Thus gold bullion becomes the antithesis to this. Some investors just feel more at ease to see and even touch their assets.
In a more logical explanation, gold just has a better trend on the market than stocks and bonds. While the latter’s value fluctuates and relies heavily on the economic status of the market, this precious metal stands still while the whole world is crashing down. In fact, there have been analyses of this particular precious metal rising in value during government and economic crises (check it out), like the COVID-19 global pandemic. In 2020, the peak of the crisis, gold’s value surpassed the $2000 benchmark.
Question #5: How To Rollover 401k Account To Gold IRA?
There are steps to follow for this question. However, it depends on which gold IRA company you get in touch with. Each company has its style of how to rollover a 401k account. However, we’ll give you the commonly done steps purely for your information.
- Contact Your Plan Administrator – The very first step should be informing your plan administrator of your wish to rollover your 401k account. They’re initially in charge of designing your plan and explaining the benefits, but other than that, they’re tasked to monitor compliance as well. Afterwards, they’ll draft a check that will be sent directly to the Individual Retirement Account of your choice.
If you find yourself with the check, you can certainly cash it out and deposit it to your new IRA, but be forewarned. As the account holder, it’s your responsibility to finish the process within two months (or 60 days), or you will have income taxes upon withdrawal.
- Pick A Custodian – There are two types of custodians. One is traditional custodians, which offer you investments with traditional means, while self-directed account custodians let you choose which investment you wish to pursue and support your decisions through watching your account and managing it in your stead. What’s great about the latter custodian is whilst you choose from a variety of investments, they make sure you still follow the IRS rules, regulations, and policies. You don’t have to worry about technicalities and just focus on choosing the best choice for you.
- Purchase Your Assets – In this situation, you’ll be buying precious metals. Quite literally, you can shop for them from many different companies available online. However, for your retirement account investment, some policies should still be followed. For example, the gold you purchased should be almost pure (meaning 99.9% or 99.8% pure at least), in the form of billions, and are non-collectable tokens. However, these days you can always contact your precious metal dealer and let them know you’d want them for your IRA account, and they should be able to provide you with the correct form of the gold.
- Ship Them To The Depository – The depository will be under the custodian’s care. Therefore, most of them have their vaults to keep your investments safe from robbery and loss. With this, your metal dealer will ship the gold to the depository once your custodian settles the invoice. Gold is non-corrosive and does not rust, so keeping them in there for a long time won’t affect their value no matter what.
- Get Updated Regularly – Now that your rollover is complete and your new IRA is active, you can expect periodic updates from your custodian about your investment and holdings. They’ll provide you with the necessary information, or you can track your investment yourself to assess if you need to release an investment or add more to your portfolio.
Question #6: How To Know If Your Custodian Is Good?
One of the most important elements in your IRA journey is your custodian, as they will be there to oversee your account more than you most of the time. With that said, you should make sure your holder is a trustworthy and reputable institution and should possess these characteristics and abilities:
- They’re Properly Licensed – This might be a no-brainer for most of us, but many investors fail to check their custodian’s license or legal documents before forming a partnership with them. Thus, they overlook small but lethal problems that cause their downfall in the future, such as their custodian being a fraud, taking advantage of their account or closing due to poor services.
- Knowledgable With Gold And Its Role In IRA – Not all custodians take this precious metal as an asset for your Individual Retirement Account Plan, and some may have some knowledge but don’t specialize in the asset. A good custodian is someone that knows the coming and going of transactions and everything that has to do with a gold IRA. In this way, you’ll be at ease to know the one overseeing your account is experienced and well-equipped.
- Great Customer Service – In any service-based business, the blood and life of the company will always be customer service. You, as their customer and partner, should be treated well, accommodated if you ever have any questions and inquiries, and should be given quality service and products above all. A custodian that meets these much-needed elements is a good custodian indeed. Your cooperation with them will have fewer hurdles and can be a long-time partnership.