Investing part of your IRA portfolio can seem overly complex and on the outside looking in, there are some challenges to face. However, we are going to break down one barrier by identifying four steps to take to invest in a gold IRA.
You can choose to invest a portion of your retirement in gold through an individual retirement account. And once you determine the type of IRA, and how you want to invest in gold, you can invest up to your yearly maximum at any time during the tax year.
The first thing to do is decide on the type of IRA. With a traditional IRA, you receive a deduction from your taxable income for your contributions, but pay taxes on all of your withdrawals at your income tax rate. A Roth IRA provides no immediate tax deduction, but all withdrawals at retirement are tax-free.
Next, we need to select a mutual fund that invests specifically in gold.What does this mean? Well, gold is either invested through precious metals, i.e. coins and bullion, and others will invest in gold mining companies. Both types of investing are closely tied to the price of gold. Because mining companies can also mine other metals, i.e. silver, it is believed the latter offers a slight advantage in diversity.
Select the trustee of the investment is next on the list. If you choose a mutual fund that is part of a family of funds, it might offer IRA accounts as part of its services. Many brokers also serve as IRA trustees, and you can buy gold exchange traded funds and other gold-related funds through a broker. You can also choose a self-directed IRA trustee to allow you more flexibility, particularly if you choose to invest in gold bullion or coins.
Finally, we need to fund your gold investment in your IRA. As of October 2012, the maximum yearly IRA contribution is $5,000 if you are younger than 50 and $6,000 if you are 50 or older. This amount might be reduced depending on your income and if you participate in an employer-sponsored retirement plan. Arrange for a transfer of funds from your checking account or another mutual fund, or mail a check.
It is recommended that you invest only a portion of your total retirement in gold; no more than 10% to 20% of your investment portfolio should be to physical precious metals.
TIP: If you are concerned about the devaluation of paper currency in a governmental de-stabilization scenario, investments in gold bullion or coins might be appropriate and more easily handled through a self-directed IRA trustee.
Regardless of the direction you take, gold should be considered as an investment vehicle that will produce more revenue while adding an element of stability to your portfolio.