Owning physical gold or silver is something you can benefit greatly from. A lot of investments can prove volatile or risky during hard times, and having real gold and silver in your possession, or in an IRA gives you something of value that is often unaffected by global economies. In fact, it could even gain in market value when inflation or a recession hits, though it can still lose value under certain circumstances. But it’s a very stable investment for the most part, and you should just be aware of four things before you invest in it.
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1. Physical Gold Is Subject To Taxation
Like other investments in a brokerage account, physical gold bullion is taxed by the IRS. It’s a capital gains tax that happens when gold is sold based on how the gold has appreciated in value from the time you accumulated it. In theory, the tax is fairly simple and is only taxed at the flat 28% rate. But it’s something to keep in mind because you have to report it correctly on the proper tax documents.
2. Physical Gold In An IRA Cannot Be Stored At Home
The best way to invest in gold when you don’t need it right away is through a gold IRA. But if you open an IRA for gold bullion, you cannot take that gold home or even touch it. To keep your investment growing tax-free in an IRA, the gold not only has to be purchased with your IRA funds. It has to be taken by an approved transportation service to an IRS-approved depository location. This will incur storage costs for you, but it’s actually better than keeping gold in a home safe since depositories are highly secure facilities.
3. Know Your Rollover Options If You’re Funding An IRA Through A 401k Rollover
When you open a gold IRA, you can fund it if you have a 401k you no longer want to use. You can do what’s known as a 401k rollover where your 401k provider can either transfer the 401k funds to the IRA itself or send you the check which you must then deposit. And the experts at Goldco mention that “you may even consider doing a Roth conversion, rolling over funds from a 401(k) or traditional IRA into a Roth gold IRA.” Either way, you do it, your new gold backed IRA is now set to grow.
4. Know The Difference Between Gold Exchange-Traded Funds And Physical Bullion Investments
The reason you should invest in physical gold over gold ETFs is that it’s more stable overall than an ETF; and you can also have it physically delivered to you. Gold ETFs certainly can allow an investor to take advantage of a rise in gold prices and sell their shares later. But there are definitely occasions when you would need to take possession of gold in its physical bullion, and owning shares in an ETF doesn’t grant you that right. Hence owning physical gold is better.
By far and away the rewards to owning physical gold through an IRA outweigh the restrictions that are put on doing so. But you should use a comprehensive guide when opening a gold IRA to make sure you’ve done it right.
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