According to a CNBC and SurveyMonkey survey earlier this year, 53% of Americans felt behind on retirement planning and savings. If you’re concerned about your retirement savings and want to switch up your portfolio, you may be considering investing in alternate assets.
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While there are many ways you can invest money in your retirement accounts, one of the options available to those seeking to diversify their portfolios is purchasing gold. You can diversify your retirement savings with a gold IRA, where you can also keep silver, platinum and palladium. This account also allows you to invest your retirement savings in precious metals with the tax benefits of a conventional IRA.
If interested, here’s how you can buy gold through a tax-advantaged IRA.
Choose a Custodian for Your Self-Directed Gold IRA
“A gold IRA offers the same tax advantages as the traditional or Roth IRA, such as tax-deferred or tax growth,” said Adam Butler, senior account executive at Anthem Gold. If you want to keep physical gold in your IRA, you can’t use your regular account, and you’ll have to open a separate one known as a Gold IRA.
Butler added, “Find a reputable custodian that specializes in precious metals IRAs. They will handle the storage and tracking of your physical gold.”
This gold IRA works like a traditional IRA retirement account with the same contribution limits and distribution rules. The key difference with this account is that you can hold physical assets.
It’s essential that you conduct your research when deciding which account to go with, and you may want to seek out a referral for a trustworthy online gold dealer. It’s also worth pointing out that most of the largest brokerage firms don’t offer a gold IRA option, so you’ll need to find the correct account, as there can be significant fees associated with investing in precious metals. You’ll also want to review the costs involved, as broker fees and commissions vary.
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Fund Your Account
“Contribute to your gold IRA using cash, a rollover from another retirement account, or a qualified plan distribution,” said Butler. You have these main strategies for funding your account and you’ll want to speak with a qualified professional to help you make an informed decision.
One of the easiest ways to fund your gold IRA is through a rollover, which involves using funds in an existing account. To begin this process, you should inform the administrator of your current retirement plan of the amount. One of the worst ways to fund your IRA account is to use cash, because you’ve likely already paid taxes on it, defeating the purpose of using an IRA as a tax-advantaged investment tool.
Before purchasing your gold, you must also review the IRA rules and regulations regarding how much you can contribute to this account annually. For 2024, the IRS has set the IRA contribution limit at $7,000 for employees under 50 and $8,000 for those 50 and older. You’ll want to decide how much of your contribution limit goes toward purchasing physical gold compared to other assets you could be investing in.
Purchase Approved Gold
The next step is to select IRS-approved gold coins or bullion. Butler pointed out that the IRS has specific purity and weight requirements for precious metals held in IRAs. This means you can’t just purchase any gold bars you wish, as the standard for gold is that it must be 99.5% pure.
Financial experts also generally warn that you shouldn’t invest more than 5% to 10% of your retirement savings in precious metals if you want to diversify your portfolio.
Figure Out the Delivery and Storage
Butler noted that your custodian will arrange for the purchase and delivery of the gold to an IRS-approved depository. The gold will be stored securely on your behalf, as this is a crucial aspect since you can’t keep your coins or bars in a safety box at home. Your gold custodian will facilitate the delivery because home storage is considered a distribution, meaning that it’s subject to taxes and penalties.
These are the steps that will help you buy gold through a tax-advantaged IRA, but it’s important to remember that these accounts come with higher fees and other risks that you’ll want to consider. If you’re looking to diversify your portfolio or to avoid market volatility, you’ll want to speak with a qualified financial advisor to ensure that you’re investing your retirement savings wisely.
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This article originally appeared on GOBankingRates.com: How You Can Buy Gold Through a Tax-Advantaged IRA
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