It’s always a good idea to save or invest for retirement. While you’re young, you can take on any job you want to and as many as you can possibly handle. But as you age, things you could do easily while you were younger slowly become difficult; one of such things include actively earning an income. This is why employees are usually retired at age 65 and for many people, retirement can be scary.
Why? Well, one very obvious reason is the fact that they may no longer be able to earn money, at least not actively. This is scary because getting by can quickly become a challenge if they hadn’t saved up or invested for those gray days. It’s true that pensions exist for senior citizens, but many will tell you that what they get is barely enough. Click here to learn more about why you should start saving for retirement early.
The more financially prudent workers know this and that’s why they take up a 401(k) plan, open an Individual retirement account (IRA), invest in stocks, bonds, or ETFs. Some even do all of these and more just to make sure they live comfortably at retirement. As you’ve just seen, there are many ways that one can financially prepare for retirement and live on your own terms as one grows older.
But there’s one option that we are yet to mention. Many believe it is one of the safest ways to save for retirement. We are talking about a gold IRA.
What is a Gold IRA?
If you’ve heard about a conventional IRA, you’ve probably heard about a gold IRA too. But if you haven’t, you’re about to learn a fair bit about it. Conventional IRAs are attractive because they allow people to save and invest for retirement, and they have numerous tax advantages. With this account, individuals can invest in different investment products including stocks, bonds, mutual funds, and ETFs.
But with a gold individual retirement account, it gets even better. Like the conventional IRA, you enjoy all the task benefits but with this account, you are exposed to much more investment products. With gold IRA, in addition to those we mentioned above, you can also invest in precious metals like gold and silver, art, real estate, and even cryptocurrencies.
How Do They Work?
First, you’d have to open an account, but most conventional brokerage firms don’t offer this account. To open one, you’d need the help of a custodian as they specialize in these types of retirement account. They also help manage all the necessary paperwork and help with the storage of the gold once it’s been purchased.
Once your account has been set up, the next step is finding an IRS-approved institution or facility where the asset will be stored. Your custodian will most likely suggest a few options but just know that where you decide to have the asset stored is entirely up to you as long as it is not being stored in your home. We’ll talk more about this in a bit.
Once you’ve decided where to store the asset, you can begin paying into the account. It is these funds that would be used to purchase the gold. As we mentioned earlier, your custodian will oversee the transfer of the asset to the depository and ensure every aspect of the transaction complies with IRS standards. For example, according to the IRS, gold to be stored in a gold IRA should be of 99.5% purity.
Not all gold meets this standard but finding those that do shouldn’t be a problem. The Canadian Maple Leaf, America Buffalo, and Australian Koala bullion coins meet this standard. The American Eagle coin doesn’t technically meet the IRS’s standard, but you can store it in your gold IRA as it is accepted by the IRS.
Can You Store Gold from Your IRA at Home?
The short answer is no because it is illegal for individuals to be custodians of their own IRA assets. Don’t be mistaken, investors are allowed to store gold at home as long as it isn’t IRA-purchased gold or other precious metals. The Internal Revenue Service is pretty clear about this.
Investors should ignore ads they see online about home storage precious metals IRAs. Many even go as far as saying their plans are approved by the IRS, but as we said, the IRS is clear about its stand about home storage IRAs, and this information is available for everyone to see on their website. Section 408(m) of the IRS code clearly states what types of precious metals can be stored in an IRA and that they must be in possession of a trustee.
Delaware Depository, CNT Depository, and Brinks Security are some trustees or vault companies approved by the Internal Revenue Service. Visit https://www.metal-res.com/gold-ira/can-i-store-my-gold-ira-at-home/ to learn more.
The Internal Revenue Service views IRA-purchased gold stored at home as an IRA distribution that is subject to taxation. If you’re under 60 years old, there’ll also be an additional 10% penalty for early withdrawal.
No doubt, there’s a lot of confusion surrounding gold IRAs, and most of it comes from ads online talking about “home storage”. Now, while it is true that people can set up an LLC and control their IRA purchases, there are many stringent requirements that must be met to avoid breaking any rules. But what many people seem to be confused about is that even if you set up an LCC and manage your account, all the gold must be stored by a third party, in a depository under the LCC’s name.