Convert existing IRA to Gold

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Convert existing IRA to Gold

In this brief article we’ll focus on how to transfer or convert an existing IRA into physical Gold.

Obviously, we could just liquidate the existing IRA and go buy Gold with the proceeds.

That’s easy but it has significant tax consequences.

The fact that you are searching for information online suggests that you are interested in buying physical Gold inside a tax preferred retirement account like an IRA.

So let’s clarify up front that we are talking about converting an existing IRA to a Gold IRA.

We can do that without facing any tax consequences.

This same information applies to other forms of retirement accounts (RAs). Any of these RAs can be converted to a Gold IRA:

  • 401K
  • Roth IRA
  • SEP
  • TSP
  • 403b
  • 457b
  • Annuities
  • Pension plans

Gold IRA guide

To begin our Gold IRA guide let’s understand that “Gold IRA” is a generic term. We can hold Gold, Silver, Platinum, and Palladium in our “Gold IRA”.

“Gold IRA”, “Silver IRA”, “Precious metals IRA” – all of these terms refer to self-directed individual retirement accounts (IRAs) established by the Taxpayer Relief Act of 1997.

After you fund your Gold IRA you get to pick which Precious metals you will hold and what form you want those metals to be in.

In general you can choose Bullion bars and Coins made by IRS-approved refineries along with Coins produced by government mints.

get a free Gold Investing kit

Benefits of Gold IRA

The main benefit of a Gold IRA is that it provides us with a way to own physical Gold metal inside a tax preferred retirement vehicle.

Like any other IRA we get the same tax benefits from a Gold IRA as we do from a traditional IRA holding stocks and bonds.

The key difference is that when it is time to take a distribution from our Gold IRA we can choose to take possession of our physical Gold if we want.

At that point the shiny yellow stuff is in our hot little hands to do with as we please (while abiding by all IRS rules, of course).

We can sell the Gold at the local Coin or pawn shop, bury it in the garden, give it to the grandkids, or lose it in a boat accident.

Transferring wealth through the ages is what Gold is all about. It is inherently recognized by all humans as something of value.

While its price per ounce may vary over the years when measured in the fiat currency of the day, Gold is never worth zero in any currency – ever.

Gold IRAs provide a unique way to combine the wealth preservation aspects of physical Precious metals with the tax benefits of a self-directed IRA.   

401K to Gold IRA rollover

With a 401K or IRA to Gold rollover there is no risk of tax repercussions because the Investor never takes possession of their retirement funds and the IRS 60-day time limit doesn’t get triggered.

These are the simple steps to convert an existing retirement account to a Gold IRA:

  • Choose a Gold IRA company
  • Open an account
  • Initiate a distribution or rollover from the existing retirement account
  • Fund the Gold IRA account
  • Select the Precious metals to hold in the Gold IRA

Convert 401K to physical Gold

Selecting specific Precious metals products is where the rubber meets the road in the process of converting our existing 401K or IRA to a physical Gold IRA.

The choices we make could have significant consequences both immediately and long-term.

Which metal to choose

Our first choice is which metal to choose between Gold, Silver, Platinum, and Palladium. Or perhaps we want to pick a mix.

The ideal selection will be different for each Investor but we can consider some general guidelines.

Gold is the hands-down winner as store-of-value over the ages. It’s hard to go wrong owning some Gold.

From a demand perspective, Silver is an interesting metal because it has significant industrial demand while also enjoying Investor demand as a hedge against Inflation.

Gold’s industrial demand is quite limited because of its cost. Most of the Gold that has ever been mined is sitting above ground in museums, vaults, and jewelry boxes.

Silver on the other hand gets used in very small quantities in all kinds of electronic devices where it isn’t economically viable to recover the Silver.

In other words, Silver gets used up and thrown away.

Industrial demand for Silver is growing because Green energy (solar panels), electric vehicles, and 5G technology are all highly dependent on the conductive properties of Silver.

Because of the two-pronged demand for Silver it probably makes sense to include at least some of the white metal in our Gold IRA.

Platinum and Palladium

Platinum and Palladium are the other white Precious metals.

Their primary industrial demand is for catalysts in automotive catalytic convertors.

The metals also enjoy some amount of Investor demand from the simple fact that the IRS allows the metals inside self-directed IRAs.

Whether any Investor demand otherwise exists for these two metals is debatable. They certainly can’t compare on historic terms with Gold or Silver.

Another point against these metals is that the average human can’t tell any difference between Silver, Platinum, or Palladium.

Silver is under $30 an ounce currently (May 2021) while both of the other metals are about $3000 an ounce.

Three white Precious metals and one of them is 100 times less expensive than the other two.

It is very hard to justify why an Investor would purchase the more expensive metals if Silver is available.

Most weight of metal for the least money

Regardless of which Precious metals we choose to hold in our Gold IRA we always want to get the most metal possible for each Investment we make.

By following this guideline we avoid one of the primary risks with a Gold IRA and that is paying a premium for collectible Coins.

The only time it makes sense to pay for Numismatic quality Coins is when we want to appreciate them as timeless pieces of beautiful artwork. Some of the pre-1933 Gold Coins are absolutely stunning.

As art collectors we understand that beauty is in the eye of the beholder so the value of our collectible Coins can fluctuate dramatically over time.

As conservative Investors we aren’t buying artwork, we are buying physical Gold.

Every time we invest money in our Gold IRA we want to get the most ounces we possibly can for every penny we invest.

That means we aren’t interested in proof Coins, boxed Coins, certificates of authenticity, or any other fancy-schmancy stuff.

Just remember that we're investing in Precious metals not art.

Gold IRA tax rules

There’s no question about whether setting up a Gold IRA is allowed by the IRS or not.

The Taxpayer Relief Act of 1997 clearly defined the parameters for Investors to hold physical Gold and Silver in their individual retirement accounts (IRAs). Platinum and Palladium were added in 1998.

Those Gold IRA tax rules also specify the acceptable forms of Precious metal that can be held in a tax preferred manner.

In general, the metal must be of Bullion quality (99.95% pure) or better and come from a recognized source like a government mint.

Coins and bars meeting these specifications can be held in a self-directed IRA (“Gold IRA”) and those metals get the same tax treatment that stocks and bond receive in a traditional IRA.

That means when it comes time to take a distribution from our Gold IRA any capital gains will be taxed as ordinary income just like a stock or bond.

In contrast, the capital gains on Precious metals held outside a Gold IRA  are automatically taxed at the 28% rate for collectibles.

The Gold IRA is a money-saver for Investors who fall into tax brackets below 28%.

Home storage Gold IRA

As you do your due diligence before converting your existing IRA to Gold you will likely see references to home storage Gold IRAs and Checkbook IRAs.

In a Checkbook IRA the Investor creates an LLC that serves as the Custodian for the IRA.

The alleged loophole in this Investment vehicle applies exclusively to Gold American Eagles because these Coins are minted by the U.S. Treasury.

If you are interested in pursuing this option have your tax professional dig into Internal Revenue Code 408(m)(3) so they can provide guidance appropriate to your unique situation and tolerance for risk.

Be sure and discuss the possibility of the IRS disallowing the entire setup when it comes time to take distributions.

In that scenario the Investor could be taxed at the 28% rate for collectibles while also owing back taxes and penalties for any year that the IRS disallowed.

As always, do your due diligence before putting your money at risk.

Noble Gold IRA

Comparing all the companies that offer Gold IRAs can become an overwhelming task.

They all make the same claims: best customer service and education, low fees, knowledgeable representatives to help you, etc...

One of the ways to sort the companies is by the minimum required Investment.

The IRS caps the maximum annual contribution for an IRA at $6,000 ($7,000 over age 50) so it isn't possible to setup a new Gold Roth IRA at a company where the minimum Investment is over $6K.

With their $2,000 minimum Noble Gold is demonstrating that they care about all Investors in the Precious metals IRA space, not just the ones with lots of money.

Texans may be particularly interested in the Noble Gold IRA since their recommended depository is located in Dallas.

Noble Gold is a relatively new company, founded in 2017. Gold IRA Investors focusing strictly on a company's years in business can start their research with older companies and then come back to Noble Gold later and see how they compare to the other candidates.

Gold IRA reviews

In the Gold IRA review below we've listed some candidate companies by their years in business.

Investors can use a list like this to compare Gold IRA companies and focus on the factors that matter the most for their particular circumstances.

Low minimum deposit will be important to Investors funding a first-time Roth Gold IRA but Investors rolling over existing retirement accounts are likely to focus on other factors.

Proof Coins are included as a comparison factor because these Coins are a poor choice for most Investors. The fact that a Gold IRA company offers these Coins shows that they are willing to let Investors make less than optimum choices. Notice that Fidelity doesn't offer proof Coins so there is no temptation for their representatives to push those overpriced options on gullible Investors.

When you get to the point of calling Gold IRA companies ask the representatives if they recommend Bullion products or if there are better options.

The response to this loaded question may help you find the company that you will be most comfortable working with.

If a company gets pushy about 'Investment quality' Coins (typically proof or boxed Coins) or mentions a lack of liquidity when it comes time to sell, immediately cross that company off the candidate list and keep shopping.

There are lots of Gold IRA companies to choose from so don't let pushy salespeople influence your Investment decisions. Most of the companies offer free Investment kits if you visit their website.

Precious metals IRA company

Fidelity

  • Founded: 1946
  • BBB rating: C-
  • Proof Coins: No
  • Minimum Investment: $1,000

Patriot Gold Group

  • Founded: 1990
  • BBB rating: A+
  • Proof Coins: Yes
  • Minimum Investment: $15,000

Birch Gold

  • Founded: 2003
  • BBB rating: A+
  • Proof Coins: Yes
  • Minimum Investment: $10,000

Goldco

  • Founded: 2006
  • BBB rating: A+
  • Proof Coins: Yes
  • Minimum Investment: $25,000

Regal Assets

  • Founded: 2010
  • BBB rating: unrated
  • Proof Coins: Yes
  • Minimum Investment: $10,000

Noble Gold

  • Founded: 2017
  • BBB rating: A-
  • Proof Coins: Yes
  • Minimum Investment: $2,000

Gold IRA

Year founded

BBB rating

Proof Coins

Minimum Investment

Fidelity

1946

C-

No

$1,000

Patriot Gold Group

1990

A+

Yes

$15,000

2003

A+

Yes

$10,000

2006

A+

Yes

$25,000

2010

unrated

Yes

$10,000

Noble Gold

2017

A-

Yes

$2,000

Conclusions

In this brief Gold IRA guide we've looked at how to transfer an existing retirement account into physical Gold.

We've considered the different Precious metals we can hold in our Gold IRA and why we might choose one metal over another.

A key point we covered is how to avoid overpaying for the metal inside our Gold IRA by staying away from proof Coins, boxed Coins, and any other premium Coins.

For other questions about how to convert an existing IRA to Gold, or whether an existing retirement account is eligible for transfer, we can reach out to one or more of the Gold IRA companies. All of the reputable companies have knowledgeable representatives available to help us.

   

Bryan V Post is a California-registered Investment Advisor Representative specializing in the Precious metals.

He is the founder and CEO of Satori Traders LLC, a California-registered Investment Advisor.


Bryan has worn numerous hats during his life:

Engineer, Portfolio manager, Precious metals Investor, Technical analyst, Proprietary trader, Swing trader.