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In order to fully understand how you can put money into a physical gold IRAs or even physical silver IRAs, you need to understand how these accounts work and what let to the changes that allow these types of investments in your IRA or even your 401k.
Retirement Accounts – An overview
Retirement accounts can vary from person to person and honestly, from job to job. There are a number of variations of how you can put your money away for retirement and these options can be somewhat confusing to a normal person. If you work for the government or have a job as a teacher then you may be able to set up entirely different accounts than others. How you choose to manage and setup your retirement account is really important, not only can you save more in regards to taxes but you could earn more down the road.
Setting up multiple accounts or different accounts to help spread the risks of how your money is going to be managed is always a good idea. Perhaps you have a retirement fund directed by your employer. Well if you are limited in any way by what you can invest in and how often you can change your assets around then that creates more risk for you in the future. Diversifying always creates a more stable return on your investment long term, you may however experience some dips along the way and the best thing to do in that case is just to ride them out and hold on.
Below are some of the more common types of retirement funds available and what they offer to any person who is currently working.
What is a standard IRA?
An IRA is a form of retirement account called or referred to as an Individual Retirement Account. These accounts are set up to help those save for retirement by using pre-tax money. By using pre-tax money you are effectively lowering your annual income thereby placing less of a tax burden on you at the end of the year.
You are limited to how much you can contribute if you are married or single. The rules are pretty straightforward and have been constant for years, there may be some changes in the future so always keep up to date.
Typically for a single person you can add up to 5 thousand dollars and for a married couple you can up to 10 thousand dollars to any IRA account. These limits are actually universal so no matter what type of account you do setup you will have to make sure you don’t go over or face a potential tax penalty at the end of the year.
What is a self directed IRA?
A self directed IRA fund is exactly as it sounds. You direct what funds to invest in and in what proportions this money is used. You may be given free rein to choose to invest in individual stocks and bonds or you can choose between varieties of funds. The number of choices you are given is really up to the administrator of the IRA account.
Now this may seem a bit counterintuitive as you are given a choice of what you can invest in and you may be limited to the number of choices. This is still considered a self directed IRA fund in that most of the decisions are up to you and you alone. There are some IRA funds where you are not limited whatsoever in how you choose to invest your money.
What is a Roth IRA?
A Roth IRA is different in that the money you put into this account is taxed beforehand. This means as you start to withdraw the money in your later years it will not be subject to any tax. This can offer a great benefit to those that believe that taxes are just bound to rise. Roth IRA’s are also under the guidance of a custodian for many cases but there are some self directed Roth IRA accounts you may be able to set up.
The best IRA accounts are those that don’t restrict the actions of the investors. If you choose to pick individual stocks and bonds then that should be your choice, limiting choice limits the chance of diversifying your accounts and that can be a risky proposition.
When can you access your money in a Roth IRA account?
You can access your money at any time. You may however be subject to penalties and tax obligations if you should withdraw more money out of this account. Any money withdrawn may be considered income and as such could increase the amount of taxes you owe at the end of the year. The current penalty is 10 percent of the money withdrawn from this account if you should do so early on.
One benefit of a Roth IRA as opposed to a traditional IRA is that you are not required to take a distribution at a specific time. You can withdraw your money after you reach 59.5 years of age with no penalty but you can also just keep it there with no problems, so there is more flexibility in a Roth IRA.
Can you have a Roth IRA and a traditional IRA at the same time?
Yes. There are no restrictions to the number of retirement accounts you can have. If you happen to have a 403(b) plan there is nothing stopping you from opening up both traditional IRA accounts and a Roth IRA account. However, the amount you can contribute in total to those accounts is still limited, so always watch how much you add to each account each year.
You should be at least 18 years old and currently employed or self employed to qualify to open a retirement account.
What is a SIMPLE IRA?
A SIMPLE IRA is one that actually is very beneficial to those who work for a profitable and generous company. Many employers recognize that great talent is hard to keep so by creating perks such as various forms of retirement accounts the employees will be more likely to stick around. That is one of the reasons why a SIMPLE IRA fund was created.
Now, what simply stands for being Savings Investment Match Plan for Employees and this allows for an IRA to be formed for a company of less than 100 people. Typically this is an advantage to those small companies starting out and needing to attract talented people. The employer is required to contribute 2% of annual income but can increase that to 3% if there is a reason to do so. As well you are limited to investing $12,000 annuallyin this plan as an employee.
SIMPLE IRA’s may differ from SEP retirement accounts and there may be good reasons to open a SEP IRA account as opposed to a SIMPLE IRA account. These decisions should be decided early on in the business planning stage as this could greatly alter how profitable a business is from year to year.
What is a SEP IRA?
SEP IRA funds are a form of retirement account where if you are either self employed or have a very small business you can set up a IRA fund to help yourself and your employees plan for the future. SEP stands for simplified employee pension.
All money is 100% vested in this account and there are no restrictions on the type of investments you can make. There is no custodian to speak of in most SEP IRA funds as there is very little oversight. This can be a great way for any consultant or freelance worker to setup an account to help them with their yearly taxes and also to help plan for the future.
What standard investment options are available for an IRA?
The investment options you may have in your IRA would vary from account to account. There really are no set options here. Now, many accounts allow a pretty wide array of investment options including the chance to buy stocks, bonds, certificates of deposit, and various money market funds to name but a few options available.
You may not be able to go into the more speculative investment options such as buying options or investing in FOREX. The restrictions are to keep you from losing money which you would need for your retirement later on.
How Silver and Gold can be invested in an IRA?
Here is a chart that shows you what types of gold, silver, platinum and palladium can be invested into physical gold IRAs, physical silver IRAs, or other precious metals IRA accounts:
(1) Certain coins like the American Eagle coin, that have gone through certification are not allowed.
(2) Bars and rounds need to meet a specific fineness as shown here:
Palladium .9995+ // Platinum .995+ // Silver. 999+ // .9995+ Gold
The bars and rounds must be certified through qualified institutions.
Now, let’s discuss how this works.
Silver, Gold, Platinum, and Palladium can all be invested in an IRA through gold backed IRA fund (or whatever precious metal IRA you are investing in). These are separate funds that differ from your standard IRA or SEP, and SIMPLE IRA accounts. Essentially, you can only invest in gold, silver, palladium, and platinum through a fund that keeps these precious metals for you in a secured vault that is monitored by the IRS. These restrictions on these companies are in place to help secure your assets for the future.
Any gold, silver, or platinum that you buy will then be placed in the vault for later safe keeping. You will not be able to touch this precious metal until you retire. As well any precious metals you may have already cannot beplaced into this fund as you must purchase through a gold backed IRA fund.
You can transfer any amount of money from one type of IRA fund to another. This money can then be used to buy gold, silver, and platinum coins and bars. There is no restriction on the number of retirement accounts you can have open so keeping your older retirement accounts active is a wise idea.
Three Reasons why Gold is a good choice for an IRA?
Gold and other precious metals is always a good idea to buy when the market is in a tizzy in regards to the various fiat currencies. All of your investments in your other accounts are denominated in United States dollars and that means if the dollar drops in value then those equities will also drop as a result. Basing your entire future upon the whims of the political machinations of those in power is never a good idea.
- The first reason why gold is a good choice for an IRA (meaning physical gold IRAs) is that it secures a certain amount of money from future calamities. Gold is a globally recognized form of currency that is exchanged on the open market daily. While the way the precious metal may change in how it is valued it will always be recognized as a source of wealth around the world.
- The second reason why gold is a good choice for an IRA account is that gold typically moves in the opposite direction of the equity markets. This means as the stock market goes down the price of gold will go up, this is doubly true if the value of the United States bonds lose their value due to default. Loans are secured based upon United States treasury bonds being used as collateral, if those bonds should collapse in value than a lot of loans will become dubious and that will plunge the world into an economic turmoil unlike we have seen.
- Finally, gold is a good asset to have as the price of gold should continue to rise (here is our live gold price chart) as the world economy will eventually pick up. The market uses gold for the majority of the items it sells each and every day. Those items are really only picked up when the economy starts to take off. While we all wait for a global recovery the price of gold will remain depressed, and that makes it an ideal buy right now.
Always considering the future price of an asset will help determine how much you should buy at any one time. Using dollar cost averaging helps to secure your retirement account in the long run, which is why so many people advocate buying in the market dips. Never make a rash decision when it comes to selling off any asset especially gold as doing so can really hinder your future gains.
What is the future for retirement accounts?
There are always those who choose to innovate new financial instruments and help the average person save for their retirement. Recently, the changes helped all types of accounts by allowing a cost of living adjustment to all money that you can add to your retirement fund. Further changes may be in order as future health care problems may lie ahead. Keeping up to date with these changes is vital to planning a good retirement in your later years.
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