Convert Roth IRA to Gold
There are two options for converting a Roth IRA to Gold.
You can take a cash distribution and purchase physical Gold with the proceeds. You will pay taxes on the distributed funds and the IRS will assess a 10% early withdrawal fee if you are under age 59 ½.
You can transfer funds from the Roth IRA into a self-directed Roth Precious metals IRA. The IRS allows you to do this one time per year without incurring any taxes or penalties.
The first option is easy as long as you are willing to pay the taxes and early withdrawal fee. Just initiate a distribution from the Roth IRA and when you receive the funds, take them to your local Coin dealer. Tell the dealer that you want to purchase Gold bars or Coins with the lowest premium over the spot price of Gold (we’ll cover this in greater detail below).
The second option is also easy but it involves a few more steps (covered below). Fortunately, all of the Gold IRA companies have specialists who can walk you through the process. Once your new Roth Gold IRA is funded, you will get to pick the physical Gold that you want to hold in the account. Tell the Broker you want the Gold bars or Coins with the lowest premium over spot.
Gold IRA vs physical Gold
In a Precious metals IRA (also known as a Gold IRA) you will own physical Gold but the IRS requires that a third-party Custodian stores the metal on your behalf.
This may seem strange but you have the same arrangement with the Custodian of your existing Roth IRA. Your Custodian holds your Stocks, Bonds, and Mutual funds in your name. The only difference is whether the Custodian is holding physical metal or paper securities.
The IRS requirement for a third-party Custodian is the major drawback to a Gold IRA. Ideally, we would take personal possession of our Precious metals and store them in a secure location of our choosing.
Unfortunately, there is only one way to purchase physical Gold using tax-advantaged money and that is a Precious metals IRA.
When we consider a Gold IRA vs physical Gold, we are really deciding whether we want to purchase Gold with tax-advantaged money or non-tax-advantaged money.
Gold IRA
Before we get into the details of how you can convert your Roth IRA into a Roth Gold IRA, let’s briefly cover the history of IRAs and Precious metals IRAs.
In 1974 the Employee Retirement Income Security Act (ERISA) created Individual Retirement Accounts (IRAs). Regular IRAs were established for tax-deferred savings and Roth IRAs for tax-exempt savings. The Act also created self-directed IRAs, both tax-deferred and tax-exempt.
ERISA didn’t specify the asset classes that could be held in a self-directed IRA (SDIRA), but it did specify that life insurance contracts and collectible objects could not be held in an SDIRA. Most investors used their self-directed IRAs to hold Real Estate.
In 1997 the Taxpayer Relief Act significantly expanded the asset classes that could be held in an SDIRA. Physical Gold and Silver were added by the original Act and, in 1998, Platinum and Palladium were added.
Gold IRA pros and cons
Like all Investments, Gold IRAs have pros and cons.
Pros
- You are able to purchase physical Precious metals using your tax-advantaged savings.
- Gold provides diversification for the typical Investment Portfolio of Stocks, Bonds, and Mutual funds.
- Gold acts as a hedge against Inflation.
- The metal in the IRA can be distributed to you, allowing you to take personal possession of your Gold when you retire. You can also sell the metal in the account and take cash distributions.
Cons
- As stated before, the main drawback to a Gold IRA is the IRS requirement for third-party storage.
- You are not allowed to transfer Gold that you already own into a Precious metals IRA. The IRS requires that metal has to be purchased within the IRA.
- There are fees for securely storing and insuring the metal held in a Gold IRA.
Convert IRA to Gold
There are just a few steps involved in converting your Roth IRA into a Roth Precious metals IRA.
Open an account at a Gold IRA company
Initiate a rollover or transfer from your existing Roth IRA into the new account
Fund the Gold IRA account
Choose the bars and Coins you want to hold in the Gold IRA
All of the Gold IRA companies have specialists who can walk you through this process and answer your questions along the way.
Most metal - least money
Whether you are purchasing Precious metals to hold directly or to hold inside a Gold IRA, you always want to get the most metal possible for the least amount of money. This means you want to purchase bars and Coins with the lowest premium over the spot price of Gold.
When you see a price quoted for Gold, that price is called the spot price and it is based on a futures contract for a 100-ounce bar of the yellow metal. The spot price is always lower than the price you will pay to purchase bars and Coins from a Broker.
The difference between the spot price and the price you pay for any given bar or Coin is called a premium. In the current market (July 2022) premiums are 3-to-10% for Gold Bullion products and can be as high as 77% for special edition proof Coins.
Some Gold IRA companies try to push investors into special edition Coins by telling them that the high-end Coins have greater investor demand when it is time to sell. This is absolute BS - Gold is one of the most liquid markets on planet Earth. And it doesn’t matter whether the Gold is a proof Coin with a certificate of authenticity or a beat-up Coin that’s been scratched and dented.
Gold is Gold – don’t fall for tall tales told by pushy salespeople. If someone tries to sell you proof Coins don’t walk away, run! They are looking out for their own interest, not yours.
If you spend some time reading Gold IRA customer reviews on the Better Business Bureau (BBB) website, you will find that most negative reviews involve people who purchased proof or special edition Coins and then lost money when they sold those Coins. It’s easy to avoid this problem – don’t buy proof or special edition Coins!
Gold IRA companies
There are a lot of Gold IRA companies to choose from. Here are some factors you can use to help in your selection:
BBB rating
______________
Most of the Gold IRA companies have an A+ rating so we have to wonder about companies that can’t maintain this level, or choose not to register with the BBB.
Minimum Investment
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On the low end is Fidelity at $2,500 while Augusta Precious metals has a minimum of $50,000.
depository
______________
All of the Gold IRA companies have established relationships with one or more Depositories and they will recommend that you store your metal with one of these ‘preferred’ Depositories. They will, however, work with any Depository that you specify. An investor in Texas, for example, might want to store their metal at the Texas Bullion Depository instead of somewhere in New York or Delaware.
fees
______________
There are more fees in a Precious metals IRA than you have experienced with your existing Roth IRA. The extra fees cover the cost of secure storage and insurance. Some of the Gold IRA companies will waive fees on large accounts, or offer incentives to new investors. You can use fees as a comparison factor when you are selecting a company to invest with.
Proof Coins
______________
Fidelity is listed here because of their low minimum Investment and the fact that they don’t offer proof Coins. Their salespeople can’t push you into products that they don’t sell.
incentives
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Incentives – Most of the Gold IRA companies offer incentives for new investors. The incentives range from waived fees to free metal. Goldco gives away up to 10% in free Silver on qualifying accounts.
Trust is the most important factor for making your final selection. You have to feel comfortable with the Gold IRA company and their representatives so take the time to talk with a few representatives. As you do, you will learn more about Precious metals IRAs and have an opportunity to get your questions answered.
Gold IRA company reviews
Its always nice to know what other people think about a product or service before we part with our hard-earned money. Just this morning I purchased a $12 cable for my cell phone and based my final selection on the customer reviews posted on Amazon.
When shopping for a reputable Gold IRA company, the best customer reviews can be found on the BBB (Better Business Bureau) website. These are actual customers who were motivated enough by their experience to create a BBB account and file a review.
In contrast to these real customer reviews, if you search the internet for “best Gold IRA”, or something similar, you are going to find articles posted by affiliate marketers who get paid for sending business to the Gold IRA companies. Marketers don’t bother with BBB reviews because they can’t post their website links in a BBB review.
In order to maintain an A+ rating at the BBB, companies have to respond to complaints and negative reviews. Negative reviews are actually more valuable than positive ones because they provide some insight into how a company deals with its customers and clients when they aren’t happy about the service or product they received.
All of these companies evaluate businesses and compile customer reviews. When you are researching a company pay attention to the negative reviews. If the dissatisfied customer mentions proof or special edition Coins, remember that you can avoid this problem by simply staying away from these overpriced products.
- Better Business Bureau (BBB)
- Consumer Affairs
- TrustLink
- Trustpilot
Best Gold IRA
To select the best Gold IRA company for your Roth IRA conversion you first have to define the factors you will use in the selection.
We've already listed some criteria to consider: BBB rating, minimum Investment, depository location, fees, proof Coins, and incentives. Years in business and customer reviews could be added to this list.
If everything else was equal, we would probably pick the company offering the best incentives for new investors. Goldco, for example, gives new investors up to $10,000 worth of free Silver on qualifying deposits. When you contact a Gold IRA company ask them what kind of promotional offers they have.
At Satori Traders we believe trust is the most important factor to consider when picking a company to invest with. We recommend that you select a few companies that meet your criteria, read their customer reviews, and then talk to their representatives. During this process you will find a company that you feel comfortable with.
Wrapup
In this short article we have discussed the process of converting a Roth IRA to a Roth Precious metals IRA.
The process itself is quite simple and each of the Gold IRA companies have specialists who will walk you through the process.
After you research a few Gold IRA companies you will get all of your questions answered and, most likely, will decide which company works best for you.
At the end of the day, what matters the most is that you feel comfortable with your Investment and understand that your hard-earned money is safely stored in physical Precious metals. Financial markets are currently in the largest economic bubble that has ever occurred. When this bubble bursts, Gold will be the last man standing and that’s where you want to have your money.
About Satori Traders
Satori Traders LLC is a California-registered Investment Advisor specializing in the Precious metals.
Bryan V Post is a California-registered Investment Advisor Representative and the founder of Satori Traders.
Bryan has worn numerous hats during his life: Engineer, Portfolio manager, Precious metals Investor, Technical analyst, Proprietary trader, Swing trader.
