Before the economic downturn circa 2008, mutual funds were a solid choice among investors. They used to serve as a great way to diversify your portfolio and offered peace of mind, as your assets were in the hands of a resourceful account adviser or broker.
When a significant amount of paper assets became as worthless as the virtual paper they were printed on shortly after the Great Recession, more and more investors wanted greater control over their assets. The self-directed IRA caught the eye of many seeking to regain fortunes lost, but where fortune goes, fraud quickly follows.
Before we get ahead of ourselves and discuss the potential for fraud, you need to ask yourself why you want a self-directed IRA. Certainly it allows you more control over your assets, but this is only an advantage if you have a goal for your portfolio.
Precious metals offer stable growth and long-term security and may be an asset to consider for your self-directed retirement assets. For example, if you would have added gold to your retirement portfolio back in 2001, you would have experienced over a 530% growth factor through the year 2013. With a silver IRA rollover for the same 13-year term, a growth trend of 711% would have had your $50K 401(k), IRA, 403(b), or any other eligible account at around $355,500. These immense growth scenarios even exclude the fact that you are able to make yearly contributions to your self-directed retirement accounts with the same tax benefits of your traditional IRA.
A Gold IRA Rollover Guide For Self-Direct 401(k) Or IRA
Firstly, it is important to remember that with great power comes great responsibility. With a self-directed IRA, you have more power and control. However, this has lead to numerous investment scams and gold or silver IRA accounts are no different.
The biggest and most recent cases of fraud involved precious metals companies using deceptive sales practices to lure consumers into investing in gold or silver collectible coins, known as numismatics, with high markups. Not only did these collectible coins have extremely high markups, as high as 40%, a large majority of them were not even legally allowed in a retirement account by the IRS. In essence, it made the uneducated consumer look like they were committing tax evasion. Fortunately many of these fraudulent precious metals companies have been brought to justice in state and federal courts, but beware, some of these seemingly reputable companies continue to use these same deceptive methods, bank millions, and disappear leaving the investors to suffer great financial loss.
If anything is to be learned from this self-directed gold IRA rollover guide, let it be known that investing in numismatics for retirement is always risky. This is not only because of the potential for fraud. Numismatics are innately risky because the investor is gambling on the future collectible value and collector demand rather than just the inherent value of the precious metals themselves. We are not here to advise that bullion is the better choice, but understand that investing in silver or gold coins in general leads to greater risk. Also, even though companies are competitive and eager to promote numismatics, they come with exorbitant markups as they aim to appeal to collectors rather than savvy investors.
When you have found a reputable company to which you can trust your custodian to purchase the precious metals for your IRA on your behalf… well… you also need a custodian you can trust! When it comes to a precious metals self-directed IRA, a reputable metals company will have certain custodians they prefer and trust. You are welcome to choose your own custodian, but it is best to use a trusted custodian that has experience in dealing with precious metals.
Filling out the paperwork for the IRA transfer (or any big financial transaction) can be a hassle, especially after financial scandals that caused, and came after, the 2008 Great Recession. Do not rush through this paperwork. It may be frustrating and time-consuming, but this will essentially be your last layer of protection against fraud. Before you submit your application, research and analyze the documents to ensure they are official and will be securely processed. One of the most convenient and secure ways to fill out the application is by doing it online. If the company truly is reputable, they will have a way for you to complete the application using e-signing and electronic forms safeguarded and verified by trusted and well-known online security services.
As with any IRS approved retirement account (to enjoy the tax benefits), the assets must be managed by your custodian and stored by a certified third party company. This is another important step in your research. Ensure the precious metals company fully insures your purchase and guarantees safe storage protected by the top in the armored security industry.
That essentially concludes the self-directed precious metals rollover process. Please remember that precious metals should be considered an asset for stable, long-term growth (as with the aforementioned 13-year example) as opposed to an aggressive investment strategy for short-term gains.