Some providers advertise their process as fast and easy. But remember, investing in precious metals is not without its own risks and liquidity tradeoffs, much like other investments.
When Does Pressure Become Too Much?
Don’t fall for a sales pitch that makes it sound like the transaction is over and done with by lunch. Be suspicious of salespeople that push you to make a decision immediately. If you can’t get clear answers to straightforward questions, it may be a good idea to look at other options.
Who Actually Handles the Account?
The metals seller coordinates your precious metals purchases through the account custodian, but the custodian isn’t responsible for providing you investment products.
The custodian is the entity that oversees your account. The custodian handles account setup and transfer paperwork. Your custodian reports on the holdings in your Gold IRA. And the custodian will oversee procedures for distributions, trading or liquidating assets if needed, and the closure process.
The depository houses your metals.
You don’t get to take delivery of your own physical gold, silver, platinum, or palladium. That’s right, in order to retain the account’s tax advantages and avoid penalties, your metals should be stored in an approved depository.
You need to make sure that your precious metals custodian works with reputable depositories that provide top-notch security, reasonable rates, insurance coverage, and a smooth process for taking distributions or selling the metals back in the future. Depositories differ in their audit processes and the insurance coverage they provide for their facilities and assets.
Storage options include segregated storage, where the depository tracks each individual bar and coin separately, and commingled storage, where the depository keeps track of ownership simply by metal type and quantity. Make sure you know where your metals will be stored, as well as any depository fees that may apply and whether the depository offers different storage options.
What Should You Ask Before Choosing?
Some companies may act as the account custodian and metals seller. But reputable companies will be transparent about their roles.
Ask the metals seller directly if they handle the entire process or if the custodial duties and storage are handled by other entities. And ask the account custodian about who performs each role. A credible answer will spell out any services that are outsourced to a third party or performed in-house.
Don’t hesitate to request documentation of the custodian’s experience working with precious metals IRAs or proof of any partnerships they claim. And you can always ask them for the contact information of the depository and the seller to make sure you know who to contact with questions down the road.
Once you’ve decided whether you want gold, silver, platinum, or palladium, the next step is deciding whether to invest in coins or bars. Ask your dealer about the types of products they offer. Ask if the products are the more widely recognized bullion that is easier to mark to market and liquidate at a later time. For more guidance on where to get a gold IRA, you can also review available providers and compare your options.
You may be able to roll over funds from an employer-based plan, such as a 401(k) or 403(b). Some employers’ plans allow for in-service distributions, and some do not, so rollover options may be limited if you are still employed by the company sponsoring the plan.
Be sure to check with your existing plan’s administrator to confirm whether funds can be moved to a new IRA and what the rules are regarding paperwork and timing. A seller is unlikely to have reliable information. A trustee-to-trustee transfer is recommended over writing a check to yourself since there are withholding and redeposit requirements that must be met by a certain date and could result in paying tax and penalties for missing the deadline.
Ask the seller to provide you with a full description of the item being purchased, and make sure you understand what you are buying and how it can be sold later, if you choose. Many coins and other collectible and numismatic items are not allowed in IRAs. Laws require that metals meet fineness standards, are made with certain alloys, or have characteristics that make them ineligible for IRA ownership. Check with the seller to make sure the item is eligible for purchase in an IRA and ask for its specific name, weight, purity, and certification of IRA eligibility.
Proof sets and special editions are often pushed to buyers by dealers. Just because an item is acceptable in an IRA does not make it a good value. Be sure to compare prices with other coins that you might consider. You may find that coins with premiums over and above the metal value or those that are more difficult to resell are being offered.
Retain records of your investment in the form of transfer requests, account statements, and purchase confirmations so that you can reconcile the amounts in your old account with the amount of the IRA balance.
Where Can Fees and Deadlines Trip You Up?
And ask about pricing. You want a clear picture of any markups added to the dealer’s bid.
It’s essential to fully understand the fee schedule before you fund a purchase and before you close your account. Ask each company for an itemized list of charges. Make sure to get an idea of account setup costs, costs of rollovers and transfers, ongoing administration fees, storage fees, buy/sell spreads, and account closure fees.
Ask if their fees are a flat rate or a percentage of your account value.
If your answer to either question is “we’ll figure that out later,” it’s time to find another company.
If you plan to do an indirect rollover, make sure you fully understand the 60-day rule – see more details here, which states that the IRA funds must be redeposited in an eligible retirement plan within 60 days or be subject to tax and penalty.
Don’t hesitate to ask the metals seller about its terms and procedures to trade back metals in the future.
Remember, your retirement savings are a big investment, no matter what asset classes you ultimately choose. It’s important to carefully consider all the details before you sign anything.