The role of gold in a balanced retirement plan
You’re probably smart when it comes to finances, but even the savviest consumers might feel their hearts race when terms like custodian and depository are thrown around.
Have no fear. This article explores one type of individual retirement account—commonly called an IRA—that might work for you: the self-directed gold-backed IRA. Simply put, this is a retirement account of precious metals (and if you’re part of 7k, you understand how this could be a wise decision). Here are a few things you should know about gold-backed IRAs:
1. A gold-backed IRA holds physical gold and silver bullion and coins, and it allows people to buy and own precious metals as part of their saving strategy. Why is this appealing? Because for millennia, people have associated precious metals with monetary value.
2. A gold-backed IRA is not the same as a traditional IRA. In fact, precious metals must be held separately from traditional IRAs.
3. Gold-backed IRAs are self-directed. That means you manage all decision making for the account. Sure, that’s a lot of responsibility, but it’s also a lot of control. We encourage you to exercise due diligence and seek the advice of licensed financial advisors to ensure you understand how to properly navigate a self-directed IRA.
How to set up a gold-backed IRA
Plenty of financial institutions are eager to help you set up a gold-backed IRA. No matter which group you choose, a few steps will have your IRA ready to roll:
1. Select a custodian. The custodian is the institution that oversees the security of your precious metals. And there are lots of options out there! The custodian arranges for your precious metals to be held in an IRA-approved secure depository (like a maximum-security vault) and facilitates the transfer of funds between your IRA and the metals dealer. The custodian also provides documentation for tax purposes, so you should expect regular communication from them.
Once you’ve selected a custodian, you’ll set up an account and decide how aggressively or conservatively you want to accumulate precious metals.
2. Choose a metals dealer. A legitimate dealer, like 7k Metals, will have a professional online presence with customer ratings. The dealer should help you understand the differences between eligible metals. Many dealers provide competitive pricing and preferred customer rates. They also coordinate with your chosen IRA custodian for seamless transactions.
Finally, the dealer’s job is to securely ship your precious metals to the depository of your choice.
3. Learn about depositories and select one. A depository is a secure facility designed to keep your precious metals safe until you want them in your hot little hand or choose to sell them. Depositories also provide insurance coverage against loss or damage, and the account holder chooses the depository.
4. Manage that account! This is the fun part. You will work with your IRA custodian to monitor the value of your assets. When you’re ready to cash out, you can request that the metals ship directly to you, or you can call a metals dealer and ask for an offer on the gold and silver in your stack.
Buyer, beware
Not all custodians have the same commitment to ethics. Here are a few warning signs as you get started:
• Some institutions enforce holding times, the minimum amount of time that your metals have to be stored in your IRA or you’ll be seriously penalized. These penalties are separate from taxes or early-withdrawal penalties. When you sign on the dotted line, make sure you first ask if holding times are in effect.
• Carefully review and understand all fees, including commissions, shipping and insurance costs, storage fees, and transaction or disbursement fees to avoid unexpected costs that could impact your IRA value.
• Read the fine print on timelines and processes. Get crystal clear on what will happen with your IRA, when, and how. Especially be sure you understand early-withdrawal penalties, which can be hefty. Standard IRA practice is for funds to be withdrawn only when the account owner is 59.5 years of age or older.
• Ask your custodian about required minimum distributions (RMDs) starting at age 73, which may require selling a portion of your precious metals to meet the distribution requirements.
On the flip side, reputable custodians will boast these qualities:
· Low service fees
· Transparency in everything from fees to partnerships
· A list of preferred metals dealers, rather than one you must work with
A gold-backed IRA that helps prepare for your future might be a good option for you. But there are risks associated with self-directed gold-backed IRAs, including potential market fluctuations, storage fees, and liquidity concerns. Be sure to understand these risks before proceeding. For personalized counsel, consult a licensed financial or tax advisor.
7k Metals is an online retailer of physical precious metals, including IRA-eligible precious metals. 7k is not an IRA custodian and does not offer or provide IRA custodial or fiduciary services. Information provided by 7k or available on 7k’s website is for educational purposes. 7k and its independent 7k Associates are not investment advisors and do not offer investment, tax, or legal advice.
Buying, owning, and selling precious metals and numismatic coins carries risk and has legal and tax implications. The price and future value of precious metals and collectibles are based on many factors and are subject to market, economic, and political conditions. Past performance is no guarantee of future value. Consult your own legal, tax and financial advisors before purchasing precious metals.