Self Directed Gold IRA Custodians
What is a Gold IRA Custodian?
A gold IRA custodian allows its clients to hold alternative assets, including physical precious metals in the custody of an Individual Retirement Arrangement approved nonbank trustee.
Self-Directed IRA custodians also allow the purchase of silver, platinum or palladium coins and bars that meet minimum purity requirements.
History of Gold Individual Retirement Arrangement Custodians
IRA’s were created in 1974, as part of the Employee Retirement Income Security Act (ERISA). The two primary functions for which IRA’s were designed are:
Individuals may create a tax-deferred retirement account to save for the future if they are not covered by their companies’ retirement plans. These accounts also allow individuals to keep their qualified plan status intact when changing jobs, since most plans only last five years under traditional employment scenarios
In its first year (1975), contributions to IRA’s exceeded $1.4 billion, then soared to over $4.8 billion by 1981—in large part due to the popularity of these programs with Americans looking for ways to save money and invest in their futures at a time when interest rates were high and banks offered few other alternatives
The financial sector was delighted with the huge influx of new capital, because it meant they had a regular source of money to invest in stocks and bonds.
But most investors were unaware that their investment options were being restricted by the same banks whose IRAs they held. They didn’t realize per IRS regulations, an investor can only hold life insurance or collectibles in an IRA—not mutual funds!
In the early 1990s, investors realized that their IRAs were much more flexible than they had been led to believe. Trust companies sprang up—specifically designed to offer alternative investments within IRAs. Investors no longer needed to rely on big-bank offerings alone.
With the creation of new types of investment companies, Self-Directed IRAs were established.
A Self-Directed IRA gives you the freedom to make your own investment decisions.
It wasn’t until 1997 that the Tax Payer Relief Act allowed certain precious metals to be included in retirement accounts. And with this act, gold IRA custodians were born.
Gold shot up to over $1900 between 2000 and 2010, making it a boon for IRA investments with precious metals.
What Is the Role of a Gold IRA Custodian?
Many gold IRA custodians are non-bank trust companies because of concerns over liquidity or regulatory issues. A gold IRA custodian must therefore maintain an omnibus account—an account maintained by a traditional bank on behalf of multiple entities for the purposes of executing financial transactions—to fulfill its business obligations.
Gold IRA custodian relationships also assure gold IRA clients of FDIC protection up to $250,000 in cash held within their retirement account. Here are the typical roles and responsibilities of a gold IRA custodians:
Helping establish and fund your gold IRA, executing buy/sell instructions as directed; correctly titling/inventorying assets; issuing quarterly statements of account to inform Required Minimum Distribution obligations—federal tax reporting requirements.
What Gold IRAs Do Not Offer.
Custodians for your gold IRA will not give you investment advice, or tax guidance. They are not responsible for insuring the value of your investments.
A gold IRA custodian is not obligated to investigate or validate the legitimacy of your investment choices. And they are not responsible for an investment’s performance.
What Are the Rules Governing Gold IRA Custodians?
Treasury Regulation Section 1.408-2(e)(2) through (8), which is found in Revenue Procedure 2021-4, lists the requirements that an individual must meet to become a gold IRA custodian.
It is the custodian’s responsibility to demonstrate, in writing, that he or she can satisfy each of these requirements:
- Provide the state and date of incorporation to prove how long in business. Prove continuity assuring the uninterrupted performance of fiduciaries by demonstrating established physical location. Demonstrate fiduciary experience or expertise with retirement plans
- Show that they are highly skilled at accounting for a large number of individuals;Demonstrate proficiency in handling retirement funds;Provide documentation regarding the rules used to administer their retirement plans.
All fiduciary employees must be bonded for at least $250,000 and applicants should have a net worth of at least $250,000 based on recent audited financial statements.
What Accounts do Gold IRA Custodians Provide?
IRAs are the most common kind of retirement account, and anyone who earns income can use one. The maximum annual contribution is $6,000 for those under 50 years old or $7,000 if you’re over that age—but remember that your contributions must be made from earned income (wages) rather than other sources such as investments
Earnings on a Roth IRA can grow tax-deferred until you reach age 72, at which point the Internal Revenue Service requires that distributions be made.
Roth IRAs are an excellent way to save for retirement because they allow individuals, regardless of their tax bracket, to contribute a certain amount on an annual basis.
You can take tax-free distributions from a Roth IRA at any time after you turn 59.5 years old; however, taking money out before that age will incur an early withdrawal penalty of 10%. You are not required to take RMDs with your Roth IRA.
SEP IRAs are Simplified Employee Pension plans that can be set up by self-employed individuals, partners or owners of a company to provide employees with a simple low-cost retirement plan.
Employers can make tax-deductible contributions of up to 25% of an employee’s pay or up to $58,000 in 2021. Just like with a Traditional IRA, SEP IRA holders must begin taking Required Minimum Distributions at age 72.
The SIMPLE IRA is ideal for smaller businesses and self-employed workers. Those under 50 can contribute a maximum of $13,500 to their IRAs in any given year; those over that age limit may contribute up to an additional $1,000 as penalty free catch-up contributions when they file taxes. And once again it’s important not forget about required minimum distributions (RMDs), which must be taken by account owners who reach 72 years old or later—regardless of whether you are retired or still working . And, if you’re still working past age 70½, you have to take RMDs from your IRA. The good news is that the IRS will calculate your required minimum distribution for you; the bad news is that it’s based on account value as of December 31st of the previous year (the “distribution year”), which means there can be no withdrawals made before then.
The Internet is filled with “Gold IRA Custodian” Best review sites that offer little or no useful information.
when you’re new to the world of Self Directed gold IRA custodians, it’s easy to get seduced by names like TD Ameritrade or Schwab. They’re big brands with lots of advertising; they must be reputable and trustworthy, right? There is some truth in that logic—but not enough!
Savvy marketers have discovered that they can create fake “review” websites, where they sell your information to the highest bidder.
Affiliate marketers create fraudulent reviews of gold companies and receive a fee or percentage of account values when they refer customers to those gold dealers.
IRAs based in Southern California, with many complaints and high buy/sell spreads exist. These companies have a reputation for being shady.