How to Convert IRA to Physical Gold

How to convert ira to physical gold

Guest blog post

Withdrawing your IRA before you reach age 59-1/2 requires you to pay a 10% penalty. Luckily, there are penalty-free ways to move money from your IRA, including choosing to convert IRA to physical gold.

How Do You Convert an IRA to Physical Gold?

Whether you have a traditional IRA, Roth IRA, SIMPLE IRA, or SEP IRA, the brokerage that you use most likely does not allow you to hold physical assets. You can purchase gold exchange-traded funds (ETFs), mutual funds with gold assets, and stocks in gold mining companies.

However, to obtain physical gold with an IRA, you need to open an account with a brokerage that allows investments in alternative assets. This involves several steps.

1. Open a New Self-Directed IRA

The first step in converting an IRA to physical gold is to open a new account. Most conventional IRA and 401(k) plans do not allow the purchase of physical gold due to the special requirements involved.

Buying physical gold through a tax-deferred retirement account involves specific storage and insurance responsibilities. Use a trustee or custodian that specializes in self-directed IRAs and investments in precious metals.

2. Initiate a Transfer or Rollover

Before you can buy physical gold, you need to fund your new self-directed IRA. Luckily, the process of converting assets from an IRA to physical gold is relatively easy. After you set up your new account, you can complete a transfer request.

A typical transfer request requires you to supply the account number and basic information related to your existing account. Your new trustee or custodian then contacts the existing custodian to complete the transfer.

There are no penalties or taxes involved in transferring assets from one IRA to a new gold IRA rollover. Along with converting an IRA to physical gold, you may want to convert an existing 401(k). This typically requires a rollover, which the IRS limits to once per year.

3. Find a Reputable Precious Metals Dealer

Most firms that offer gold and silver IRAs allow buying precious metals from any reputable metals dealer. You may also receive a list of preferred dealers.

When comparing metals dealers, look online for customer reviews and comments. Only buy gold from trusted firms with years of experience in the industry.

4. Choose a Third-Party Depository

The IRS does not allow you to be the custodian of your own precious metals purchased through an IRA. The physical assets need to be held by a third-party, such as a depository.

Many investment firms that offer self-directed IRAs offer a list of depositories that they work with while others may let you select a depository on your own.

If you have the freedom to select a depository, ensure that you choose a location that is insured and licensed to hold precious metals.

5. Buy Your Physical Gold

The final step is to purchase your gold. This typically involves signing an Investment Direction form that is submitted by the metals dealer to the custodian of your self-directed IRA.

You now know what it takes to convert an IRA into physical gold. Before opening an account, remember to compare gold firms and check their better business bureau (BBB) rating.

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