Serious investors searching for 401K options that stress the advantages of portfolio diversification should strongly consider an IRA that utilizes gold as opposed to paper assets. In addition to the tax benefits, investors can select from a range of IRA approved commodities such as gold bars or coins for purchase. Gold has been long recognized as a hedge against inflation but can also help minimize risks that are financial, political or economic in nature.
There are a few facts about a gold IRA rules and regulations you will need to educate yourself about before choosing gold for your portfolio. The first is that the gold in a gold IRA is required to be held by a trustee or custodian meaning that, legally speaking, the gold does not reside with the IRA owner. However, trustees or custodians must meet IRS standards for functioning as an approved entity. You will need to use entities permitted by the IRS such as banks, federally insured credit unions, or savings and loan institutions. Your gold is safe with any of these entities.
Individuals who choose to physically possess their gold while at the same time declaring it as an IRA are outside the intent of the IRS code governing self-storage because IRA assets are only allowed to be physically held by the owner unless they retire or request an early distribution. The gold IRA owner choosing to physically possess their gold risks the IRS viewing their possession of the gold as a distribution. This could result in a tax penalty for an early distribution. The IRS has specifically communicated on its website that using gold for an individual’s gold IRA must be managed by an IRS approved trustee or custodian.
The second thing you need to know is that distribution laws for a gold IRA are identical to a regular IRA. As an account holder, you can convert your IRA gold into cash but since it is viewed by the IRS as being an IRA distribution, it will be subject to the appropriate taxes.
Gold IRA’s are handled administratively just like a traditional IRA and the rules concerning early distribution or retirement distributions are identical. If portfolio diversification is in your investment plans and you are considering a gold IRA, contact an investment professional and get all the facts.