Everything You Wanted to Know About Gold IRA Transfers and Rollovers

I didn’t even know a Gold IRA was a thing?

That’s not entirely surprising. Most people have such busy lives that they often don’t have enough time to learn a whole lot about the various retirement savings options available to them. Plus, most people don’t know alot about gold. So, it isn’t surprising that gold IRAs have gone largely unnoticed.

Things are changing, though, as  recent economic conditions have a lot of people thinking twice about their retirement choices.

Higher prices at the grocery store and the gas pump have us thinking about the fragility of our purchasing power and wealth, not just for the short term but for the long term as well. Inflation is currently spiking at a 40-year high. 

Typically, investors begin turning to gold, a classic safe-haven asset that seems to get very little love, save for times of high inflation and overall economic uncertainty.

One way of owning gold is through a tax-advantaged gold IRA. But most investors don’t know much about gold IRAs, and many questions arise concerning its advantages and disadvantages. We’ll try to answer the most basic questions concerning gold IRAs. 

What is a gold IRA?

An Individual Retirement Account, aka IRA for short, is a form of tax-advantaged retirement savings. Most IRAs consist of conventional assets like stocks and bonds. 

A gold IRA, on the other hand, is similar to every other IRA with the exception that it holds gold coins and bars. Gold IRAs are self-directed, meaning that you choose which assets go into your IRA. 

Although not all assets can be included in an IRA (we’ll go over this later), IRAs are generally open to an extensive range of both paper and physical assets. In other words, you can invest in physical gold and silver as well as commodities and real estate.

Why invest in a gold IRA?

Here are a few reasons why investors choose to allocate a portion of their portfolio to gold.  

Before we go through the various reasons, just remember that since 550 BC, gold has been used as a form of money. Closer to the present day, the US even operated on a gold standard up until 1971, when then-President Nixon “nixed” it for good, canceling the transferability of dollars to gold.

While people don’t typically use gold coins to purchase goods, central banks across the globe continue to accumulate gold as part of their currency reserves. 

Hence, the disparaging term “barbarous relic,” though widely used among some investors, is functionally misleading, if not altogether false.   

Gold adds an enhanced level of diversification to your portfolio 

If you want to diversify your portfolio, you need to hold assets that don’t all move in the same direction under the same market conditions. Some assets will rise in value as others fall. But the trick is to have your fluctuating portfolio accumulate a net-gain over time despite the rising and falling of individual assets within it.

Physical gold is not correlated to most other assets. It does not hold business risk as most equities securities. It holds no counterparty risk unlike most debt securities. It is not affected by the real estate market nor is it swayed by most commodities markets. Its value gains when fiat currency values erode. And over time, currency values fall steadily due to inflation.

Gold’s inflation-adjusted value remains steady while the dollar’s value erodes

While gold isn’t correlated to stocks or most other assets, it tends to be negatively correlated to the US dollar. With that being said, the dollar steadily loses value over time. 

For example, while the US dollar has lost 86.3% of its value since 1971 due to inflation, gold’s value has held steady, when you account for inflation. That’s why an ounce of gold in 1971, costing $35 an ounce, now costs over $1,716 an ounce. 

You can argue that gold’s value didn’t really move, but that the dollar’s value declined severely against it. But this also means that every asset you hold that derives its value from the dollar also loses value in terms of its purchasing power measured in dollars.

A gold IRA offers tax-advantaged growth

People prefer to save for retirement using an IRA largely because it’s a tax shelter. They can grow and rebalance their portfolio without having to deal with pesky capital gains taxes.

The same can be said for gold IRAs. You can accrue portfolio gains tax-free. With a Traditional IRA, the only time you have to pay taxes is when you begin taking distributions when you’re retired. If you have a Roth IRA, then you’ve paid your taxes up front and your distributions are tax-free.

Accumulating wealth by holding “sound money”

The notion of accumulating wealth simply by holding money seems strange. But when asset valuations sink due to a perpetually debasing currency, then holding a form of money that retains its value is a way of accumulating wealth.

It’s like Warren Buffett’s #1 rule of investing: “Never lose money.” But if your money loses purchasing power, then there’s a fundamental problem with the money you’re holding. And sadly, that’s the case with most money in the world today. No wonder gold has lasted millennia as a source of monetary wealth.

Since 2002, the dollar has lost 39.3% of its value. A dollar back then is worth around $0.61 today. Gold, on the other hand, has risen over 480%; a phenomenal rise considering its comparative value to the dollar’s rate of depreciation.

Overall, gold is one of the few assets capable of providing both asset protection and portfolio growth.

How to get started with a Gold IRA

It’s actually quite easy if you consult a professional who specializes in precious metals IRAs. At the bottom of this article you’ll find contact information on GSI Exchange’s Gold IRA offerings. You can always give us a call.

To get started, the first thing you might want to figure out is how you’re going to fund it. 

Like any other IRA, you’ll have the same contribution limits. But if you rollover or transfer funds from another tax-advantaged retirement account, these limits won’t apply. Let’s go over each one.

Rollovers and Transfers

Rollovers and transfers are two ways to move funds from a tax-advantaged retirement account to another. 

• Rollover: When you move funds from a 401(k) or similar employee-sponsored account to an IRA, that’s called a rollover. 
• Transfer: When you move funds from one IRA to another IRA, that’s called a transfer.

Since most people have a 401(k), as most employers offer one, rollovers into gold IRAs are more common than IRA transfers. 

Another factor is that many people switch jobs several times throughout their lifetime, leaving their 401(k)s often “orphaned” with a previous employer. 

But perhaps the most compelling reason for a rollover is that employers are very limited as to what they can invest in through a 401(k). And when it comes to protecting the purchasing power of their dollar-based assets, most 401(k)s don’t offer precious metals exposure.

If you already have a Traditional IRA or Roth IRA, you can easily transfer a certain allocation into a gold IRA or a gold Roth IRA. 

Are there any tax implications when rolling over or transferring funds to a gold IRA?

Like most IRAs, a gold IRA transfer or rollover should be tax-free as long as you move the funds within 60 days. Otherwise, your transfer or rollover will be treated like a distribution, in which case you may be subject to taxes and associated penalties.

Not all gold coins are eligible for a Gold IRA

Although IRA accounts, in general, allow for a wide variety of assets to be sheltered under its unique tax umbrella, assets considered “collectibles” are not eligible. Some gold coins are considered collectibles according to IRA regulations. It’s important for you to consult a professional to determine which gold coins fall into this category.

The good news is that there are many coins that are IRA-eligible. American Gold Eagle bullion coins with a minimum fineness of .995 are among them. But there are also coins that you may assume are IRA-eligible but are not, such as Krugerrands, Austrian 100 Corona coins, and many vintage American gold coins there were once in circulation.

If you want to find out which coins are IRA-eligible, we have a list here at GSI Exchange.

Are Gold IRA contribution limits the same as every other IRA?

The answer is yes. Contribution limits for 2022 is $6,000 per individual or $7,000 if you’re over the age of 50. You will also want to factor in any income limits with regard to Traditional and Roth IRAs.

But if you’re transferring or rolling over assets from another retirement account into a gold IRA, these contribution limits won’t apply.

What are the tax advantages of each IRA type?

Again, a gold IRA is like any other IRA. If you open a Tradition gold IRA, you will use pre-tax dollars to fund your account. You’re taxed only when you take distributions. If you open a Roth gold IRA, you pay the taxes up front and your distributions would be tax free.

If you decide to transfer or rollover your funds from an existing retirement savings account into a gold IRA, you’d be able to “lock-in” your current gains without being taxed. The funds that are converted into gold can then be used to protect your purchasing power against inflation. 

In addition to potentially protecting the value of your retirement savings in the event of a market decline, gold can also provide you an additional source of return or capital appreciation to boost your wealth over time.

What about RMDs?

Rules concerning required minimum distributions (aka RMDs) are the same as with any IRA. Traditional IRAs require you to begin taking RMDs at the age of 72. There are no RMDs for  Roth IRAs .

Where will my gold be stored?

Like every other IRA, your assets will be maintained by an IRA custodian. GSI Exchange partners with custodians who have experience in handling precious metals IRAs. Your gold will be stored with a bullion depository to ensure their safety. Contact us at GSI Exchange for more details regarding this process.

Is gold the right investment for me?

Ultimately, this decision is up to you. While American investors turn to gold during times of high inflation and economic distress, it might make sense to just allocate a portion of your retirement savings to gold from the beginning.

While financial assets fluctuate on a regular basis, it’s a fact that the dollar’s value has only depreciated over time while the value of gold, despite its large price swings, has generally appreciated. 

While many American investors disparagingly and misguidedly call gold a “barbarous relic,” the fact remains that central banks across the globe continue to hold and accumulate gold among its foreign exchange reserves. 

Similar to your retirement account, central banks across the globe are stashing financial assets to reinforce their nations’ financial and monetary stability. 

Among these central bank reserves is gold bullion. It plays a critical role in securing a nation’s wealth and economic stability. 

So, what say you with regard to your own wealth and future financial stability?