Gold IRAs

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Gold IRAs
Since 1997 when the Tax Payer Relief Act was enacted, individuals have been allowed to hold various precious metals including gold, silver, platinum and palladium in the form of bars, bullions or coins in their Individual Retirement Accounts. For millennia gold has been a very reputable store of value since it hardly ever loses its worth. Gold is the basis of all countries' wealth and therefore its demand keeps on rising and rising regardless of the prevailing economic conditions. Needless to say gold is a much safer investment than claim real estate or the stock market both of which are very susceptible to losses due to unfavorable market conditions. In today's world that demand is being pushed much higher by investors in emerging markets particularly China and India. Many people today consider having physical gold in IRA a wise decision and it is becoming an ever more popular option.

Procedure for investing in gold IRA

Though it can not be claimed to be rigorous, the process of putting physical gold in IRA is a bit harder than that of using paper assets. Not all IRA custodians handle investments in gold hence the first step should involve finding one who offers this option. You may have to open a separate account if you wish to invest in physical gold, a step that involves some paperwork as well payment of some fees. When this is done, you put money in your account and give instructions to the custodian on what you wish to buy. Note that there is a fee charged by the custodian either on a fixed amount basis or as a percentage of total investment. As with other traditional IRA's you can add the same tax deductible yearly contributions into your gold IRA with the limit capped at around $5000 per year. When you need to withdraw your gold, your custodian will sell it for you and you get the cash from the sale, subject to normal income tax rates. It is possible to convert your Roth account into a Roth gold IRA retaining the same tax policies as before, whereby tax on monthly contributions is charged as part of monthly income and you don't pay tax on your benefits once you retire.

Advantages of Gold IRA's.

1. As mentioned earlier gold is a very reputable store of wealth since its monetary value is not affected by external factors. Prices of gold and stocks of gold mining companies have been rising even when stock markets were crashing under the weight of the recent economic downturn.

2. If you have a self directed IRA it is possible to take possession of your gold at anytime the need develops. You also have complete control of your funds and can change as much of your IRA cash into gold as possible. If what you have is a Roth IRA account you must first transfer or roll over the assets into another type of account before you are able to invest on gold. The same condition gets some other traditional accounts.

3. Most IRA trustees accept investment in form of gold and are actually allowed to rollover some of your IRA assets into gold subject to some charges. If your current IRA company does not allow you to hold gold you can always find a new one that does. There is no limit to the number of IRA's you can have.

Disadvantages.

1. A gold IRA is unlikely to earn you a substantial profit in the short term. Although the price of gold tends to maintain an upward trend the rise in price is normally at a slow steady rate over many years. If you intend to grow your investment significantly over a few years, this isn't a very viable option. It is more appropriate as a means of preserving your savings and wealth for the long term since it is likely to retain keep their value stagnant.

2. Safe storage of physical gold may prove to be a logistical hurdle. You may have to lease safety a deposit box from a bank or a licensed gold custodian. You may also be required to take out an insurance policy for it. All these demand occasional payments that diminish your original investment. If you decide to withdraw your gold from your account to keep it at home then the IRA trustees withdraw their liability for it.

3. The risk of losing your savings though minimized is still present especially if you have invested in the stocks of a gold mining company. Though this is more likely to earn profits in the short term, it harbors greater risk since their operations are generally located in politically unstable countries where the chances of certain socio-political events interfering with operations are higher.