Buying Physical Gold
How to Buy Physical Gold through any Type of Retirement Plan
Today, investors are looking for ways to grow retirement savings, as well as to diversify the funds inside of their accounts. One way that many people today are investing for the future is through either qualified or non-qualified retirement plans.
There are many different types of retirement plans through which you can invest your money. Participation in some of these will require that you are an employee of a company – or even an owner or partner – while others can be set up by individuals, regardless of where you work, how much you earn on an annual basis, and whether or not your employer offers a plan through your company.
Buying Physical Gold Through a Traditional IRA Retirement Plan
For many years, there was just one type of IRA, or Individual Retirement Account, to invest in. This type of IRA is today known as the Traditional IRA. With this type of individual retirement account, contributions can typically be deducted from income for the year of contribution, and the earnings within the account are allowed to grow tax-deferred. At retirement, the withdrawals from a Traditional IRA account will then be fully taxable as ordinary income.
Owners of Traditional IRA accounts may only deposit up to a maximum amount of contribution each year. For 2016, that amount is $5,500 if you are age 49 or younger, and $6,500 if you are age 50 or older.
You may make withdrawals from a Traditional IRA. These will be taxed as ordinary income – and, if you are under the age of 59 1/2, then you will also be subject to an additional 10% IRS “early withdrawal” penalty on the amount that was taken out.
Once you reach age 70 1/2, you will need to start making withdrawals from the Traditional IRA account, based on the IRS’s Required Minimum Distribution (RMD) rules. If you do not make at least the minimum amount of withdrawal that is required, you can be penalized.
Can You Have Physical Gold in a Traditional IRA Plan?
If you have a regular, Traditional IRA, then you are not allowed to buy physical gold for this type of account. This is because most IRA custodians will only allow for the purchase of stocks, bonds, mutual funds, and other more traditional types of investments. There is, however, a way that you can make some adjustments so that buying physical gold in an IRA account is allowed.
How to Buy Physical Gold Through a Traditional IRA Plan
If you open up a self-directed IRA, then you will also open yourself up to the possibility of being able to purchase many different types of assets in the account – including physical gold and other precious metals. By directly rolling funds over into a self-directed or gold backed IRA, there will be no taxes due on the transaction. Going this route can allow you to start a new gold backed IRA account with a substantial amount of funds with which to purchase precious metals.
Buying Physical Gold Through a Roth IRA Retirement Plan
A Roth IRA does not allow contributions that go into the account to be deducted on your tax return. This is because the deposits that go into this type of IRA account are done with after-tax dollars.
However, the funds that are inside of a Roth IRA are allowed to grow on a tax-free basis. This means that there is no tax due on the gain inside the account each year. In addition, the withdrawals that come out of a Roth IRA are also tax-free. This can allow a significant advantage for retirees who require as much income as possible for their living expenses, travel, and other needs.
Similar to a Traditional IRA, a Roth IRA also has annual maximum contribution rules. For 2016, if you are age 49 or younger, you may deposit up to $5,500 – based on the amount of income that you earn. If you are age 50 or over, you may contribute an additional $1,000 in catch up contribution.
While there is a 10% early withdrawal penalty if you take funds out of a Roth IRA prior to turning age 59 1/2, you are allowed to withdraw your contributions to a Roth free of taxation. However, unlike a Traditional IRA, though, you are not required to begin withdrawing funds when you reach age 70 1/2. This means that the funds that are inside of the Roth IRA account can continue to grow and compound. You can also continue making contributions into the account.
Can You Have Physical Gold in a Roth IRA Plan?
While you are allowed to purchase a variety of different investments – including stocks, bonds, and mutual funds – into a Roth IRA account, the purchase of physical gold is not permitted inside of a regular Roth account. There is, however, a way that you can buy physical gold and other metals in a Roth IRA.
By rolling over some or all of the funds that you have in a regular Roth IRA to a self-directed IRA account, you can open up a much wider variety of investment options for your account. This includes buying physical gold, as well as other types of precious metals.
How to Buy Physical Gold Through a Roth IRA Plan
If you hold funds in a Roth IRA account, you can roll some or all of them over into a self-directed IRA account. In doing so, you will be able to invest in all of the same assets that are allowed in a regular Roth IRA, and you will also be able to invest in additional types of assets, too – such as buying physical gold. By rolling the funds directly over from a Roth IRA into a self-directed IRA account, there will be no taxes or penalties due.
Buying Physical Gold Through a Self-Directed IRA & Gold Backed Retirement Plan
While many people have money invested in a Traditional and / or a Roth IRA account, unless the account is self-directed, you will be limited to the types of investments that you are allowed to purchase inside of it. In most cases, IRA account holders are only able to invest in more “traditional” assets, such as stocks, bonds, and mutual funds.
A self-directed IRA, however, can open up your list of eligible investments significantly – which includes the buying of gold and other types of precious metals. These types of accounts are managed by special IRA custodians. A self-directed IRA that holds gold and precious metals is oftentimes referred to as a gold backed IRA or a precious metals IRA.
A self-directed IRA may be either a Traditional or a Roth. With a self-directed Traditional IRA, you may typically deduct your annual contribution. The funds that are inside of the account can grow on a tax-deferred basis, meaning that there will be no tax due on the gain until the time of withdrawal.
The funds that are withdrawn from a self-directed Traditional IRA account will be taxed as ordinary income tax in retirement. You may take funds from your account prior to age 59 1/2, however, unless it is for a qualifying exemption, you will have to pay an additional 10% IRS early withdrawal penalty.
In addition, as with a regular Traditional IRA account, you will be required to start making withdrawals when you turn age 70 1/2. And, at that time, no additional deposits can be made into the account.
With a self-directed Roth IRA, the money that is contributed to the account is not deductible on your annual tax return. But, the growth that occurs inside of the account is tax-free, as are the withdrawals in retirement.
Just like a Traditional IRA, you can be levied with a 10% early withdrawal penalty from the IRS if you take funds out of the account before reaching the age of 59 1/2. However, if you are withdrawing your contribution only, this penalty will not apply.
Similar to with regular Traditional and Roth IRAs, there are annual maximum contribution limits for self-directed IRA accounts. These are, for 2016, $5,500 for those who are age 49 and younger, and $6,500 for those who are age 50 and older.
Can You Have Physical Gold in a Self-Directed IRA and Gold Backed Retirement Plan?
One of the biggest things that separates a regular Traditional or Roth IRA from a self-directed IRA is the much longer list of allowable assets that can be placed inside the self-directed IRA account. This includes gold and other precious metals.
If you currently have a regular Traditional and / or Roth IRA, but you want to start buying physical gold in your account so as to take advantage of the tax benefits, there is a way that you can do so.
How to Buy Physical Gold Through a Self-Directed IRA and Gold Backed Retirement Plan
Those who own a regular Traditional and Roth IRA are typically allowed to roll over funds into a new self-directed IRA account. Special IRA custodians manage gold backed IRAs, and by funding your new self-directed IRA account with a rollover, there will be no tax or penalties due on this transaction.
When buying physical gold in a self-directed IRA account, it is important to note that there are only certain types of gold bars and coins that the IRS will allow you to purchase. This is based primarily on the purity of the metal. Working with a special IRA custodian that allows the buying of physical gold can assist you in purchasing the right type of gold for your self-directed IRA account.
Buying Physical Gold Through a SEP IRA Retirement Plan
A Simplified Employee Pension, or SEP, is a type of Individual Retirement Account (IRA) that can be set up for small businesses in order to provide retirement savings for both the employer, as well as the employees of a company.
One of the key features about a SEP IRA plan is that it is funded 100% by the employer. In fact, there are no employee contributions even allowed. On top of that, the contribution that is made by the company into an employee’s SEP IRA account will be 100% vested immediately. The employer’s contribution percentage into a SEP IRA must be equal to all of the eligible employees.
There can be a Traditional and a Roth option for SEP IRAs. Therefore, similar to with a Traditional IRA account, the contributions that are made by the employer into an employee’s account will go into the plan on a pre-tax basis. This means that the money – both the amount of the contribution, and the earnings – will be taxed at the employee’s ordinary income tax rate when he or she withdraws the funds in the future. With the Roth option, the contributions will not be deductible, however, the withdrawals will be tax-free.
An employee may actually withdraw money from a SEP IRA at any time, however, the distribution may be taxable at their ordinary income tax rate, depending on whether it is a Traditional or a Roth. If the individual is younger than age 59 1/2, there could also be an additional 10% penalty levied by the IRS on the full amount that is withdrawn.
Also similar to a Traditional IRA, a Traditional SEP IRA plan will have Required Minimum Distribution (RMD) requirements. This means that by April 1st of the year following the account holder turning age 70 1/2, he or she will be required to start taking distributions from the SEP IRA. If they do not follow these rules, they can be penalized by the IRS.
There is a maximum amount of contribution that can be made each year into a SEP IRA account. This maximum may not exceed the lesser of 25% of total compensation. In 2016, this amount is $53,000. Unlike an IRA or a 401(k) plan, additional “catch up” contributions are not allowed.
Can You Have Physical Gold in a SEP IRA?
The types of assets that may be invested inside of a SEP IRA will depend primarily on the IRA custodian that manages the account. For example, if the employer has chosen to go with a self-directed option, then there will be many potential investment alternatives, including gold and other precious metals.
How to Buy Physical Gold Through a SEP IRA
In order to truly take control of the assets that you purchase within your SEP IRA, you could roll some or all of the funds from the account over into your own personal self-directed or gold backed IRA account. This way, you will be able to pick and choose – based on the IRS guidelines for the types of metals that can be included – which metals will be the best for you and your specific goals.
Buying Physical Gold Through a Thrift Savings Plan
A Thrift Savings Plan, or TSP, is a plan that is offered to either current or retired employees of the federal civil service. These plans were designed so that federal employees could have the same type of retirement savings benefits that those in the private sector are allowed.
The funds that go into a Thrift Savings Plan are contributed on a pre-tax basis. This means that upon withdrawal, the money will be taxed to the participant as ordinary income. Unlike a 401(k) plan where employee participants can often choose from a wide variety of mutual funds and other financial vehicles to invest in, a TSP offers just six different funds to participants. These include a:
Government Security Fund
Fixed Income Fund
Common Stock Fund
Small Cap Stock Fund
International Stock Fund
Life Cycle Fund
There are annual contribution maximums in terms of how much an employee can put into his or her TSP each year. For those who are age 49 and younger, in 2016, this amount is $18,000. However, those who are age 50 and older may make an additional $6,000 in catch up contributions.
Can You Have Physical Gold in a Thrift Savings Plan?
Because the investment options within a Thrift Savings Plan are quite limited, participants are not able to buy physical gold within a TSP. There is, however, a way that you may be able to use the money from a TSP in order to purchase this type of asset.
How to Buy Physical Gold Through a Thrift Savings Plan
While still working in federal service, money cannot be rolled over into any other type of account. However, if you separate from service, you may be able to rollover your TSP funds into your new employer’s 401(k) or other qualifying plan, or to a personal IRA account. Upon retirement, funds can also be rolled into a personal IRA.
Provided that the new IRA account is a properly set up self-directed plan, then you can buy physical gold in this type of account, while at the same time taking advantage of tax-advantaged growth on its earnings.
Buying Physical Gold Through a SARSEP Retirement Plan
A SARSEP is a type of retirement plan that is geared to small businesses. While SARSEP plans can no longer be established, those employers who have a current plan in place must allow their eligible employees to continue to participate.
These plans are for employers that have 25 or fewer employees. The name SARSEP stands for Salary Reduction Simplified Employee Pension Plan. In order to be eligible to participate in an employer’s SARSEP plan, an employee needs to meet all of the following conditions:
At least age 21 or older
Worked for the employer for at least three of the past five years
Earned a minimum of $600 in annual compensation from the employer for that year.
For the year 2016, an employee who participates in a SARSEP plan may contribute the lesser of either 25% of their compensation, or $18,000. However, if the employee is age 50 or older, they may make an additional “catch up” contribution of $6,000.
There is no Roth option with a SARSEP plan, as these types of plans were phased out in 1996, and no new SARSEP plans may be established. Because of that, these plans operate more like a Traditional IRA in that the contributions into it are pre-tax, the earnings grow tax-deferred, and the withdrawals will be taxed as ordinary income in the future.
If an individual withdraws funds from a SARSEP plan prior to turning age 59 1/2, they can be penalized by the IRS in the amount of 10%. Also, once a SARSEP participant reaches age 70 1/2, they will be required to start taking at least a minimum amount of distribution from the plan.
Can You Have Physical Gold in a SARSEP Plan?
Typically, the investment options for employees who are participants of SARSEP plans will include more “traditional” investment vehicles such as mutual funds. But there may still be a way to invest in gold via your SARSEP funds.
How to Buy Physical Gold Through a SARSEP
The participants of a SARSEP plan are allowed to roll some or all of their money over into a personal IRA account. In doing so, provided that you go with a self-directed IRA account option, you can open up the list of investment alternatives that are available to you. These not only include stocks, bonds, and mutual funds, but also gold and other precious metals.
Buying Physical Gold Through a SIMPLE IRA Retirement Plan
A SIMPLE IRA is a type of salary reduction retirement plan that qualifying businesses can offer to their employees. The term SIMPLE stands for Savings Incentive Match Plans for Employees. Similar to with a SEP IRA, there can be either a Traditional or a Roth option – and, that being the case, the contributions into the plan can be either pre-tax, with withdrawals taxed at retirement (with the Traditional), or contributions can be post-tax and withdrawals tax-free (for the Roth).
The employee can make withdrawals prior to retirement. However, if he or she is under the age of 59 1/2, they may be required to pay a 10% “early withdrawal” penalty on the entire amount withdrawn. However, if the individual who is under age 59 1/2 has not participated in the plan for at least two years, that penalty amount can rise to 25% of the total amount withdrawn.
These plans are geared more towards smaller companies in that a SIMPLE IRA plan may not be offered by employers that have more than 100 employees. While the employer does not have to provide 100% of the contribution, it does have to contribute a certain amount. For instance, with a SIMPLE IRA, the employer can match the employee’s contribution up to 100% of the first 3% that is deposited.
Alternatively, the employer could just simply contribute 2% of each of the eligible employees’ compensation amounts. In either case, however, 100% of both the employee’s and the employer’s contribution will be immediately vested.
In 2016, the maximum amount that an employee may contribute into a SIMPLE IRA plan from their salary is $12,500. If, however, the individual is age 50 or older, they can contribute an additional $3,000 in “catch up” contributions.
Can You Have Physical Gold in a SIMPLE IRA?
In many cases, the participants in a SIMPLE IRA will be able to have their money invested in stocks, mutual funds, and other “traditional” types of investments. However, if the employer has chosen to set up a self-directed plan, then the world of products that are available to participants can open up considerably.
How to Buy Physical Gold Through a SIMPLE IRA?
If you want more control over the investment options that you purchase inside of your SIMPLE IRA account, then you could consider rolling some or all of your funds from the account over into your own personal self-directed IRA account. In doing so, you will be able to decide on what gold and other metals products best suit your specific needs, provided that they are within the IRS guidelines of acceptable IRA metal investments.
Buying Physical Gold Through a 401(k) Retirement Plan
Probably the most popular type of retirement plan that is offered through larger organizations is the 401(k). For many years, there was only the traditional 401(k) plan option. Today, however, some employers also offer a Roth 401(k) to their employees. Any employer that has one or more employees is allowed to offer a 401(k).
In a traditional 401(k) plan, employees can defer a certain amount of their salary on a pre-tax basis. In addition, the employer may also make an additional amount of “matching” contribution. The amount of this is typically based upon a percentage of the employee’s contribution. The funds inside of a traditional 401(k) account are allowed to grow tax-deferred.
The withdrawals from a traditional 401(k) plan will be taxed at the participant’s ordinary income tax rate. And, while participants may withdraw funds from this type of account for various reasons without penalty, in most cases, a 10% early withdrawal penalty will be levied by the IRS on funds that are taken out of the plan prior to age 59 1/2.
Those who are involved in a Traditional 401(k) plan will also be subject to the Required Minimum Distribution (RMD) rules. This means that they must begin taking at least a certain amount out of the plan after turning age 70 1/2. Otherwise, they can face a penalty.
The Roth 401(k) does not allow participants to defer their incoming contributions. Rather, the money going into a Roth 401(k) will be post-tax. However, the funds that are inside of the account are allowed to grow tax-free – and, at the time of withdrawal, funds can also come out free of income taxation.
While you may be penalized on certain withdrawals prior to age 59 1/2 (depending on how long your contributions have been inside of the account), there are no Required Minimum Distribution rules with these types of accounts. This means that the funds inside of the account may continue to grow and compound, even after the account holder has turned age 70 1/2.
Both Traditional and Roth 401(k) plans have maximum annual contribution limits. For 2016, a participant may contribute up to $18,000 into a 401(k). However, if you are age 50 or older, you may contribute an additional $6,000 in catch up contribution.
Can You Have Physical Gold in a 401(k) Plan?
A regular 401(k) plan will generally not allow the buying of physical gold for inclusion in the account. You may, however, be able to make some adjustments with you funds so that you may purchase physical gold, and to still be eligible for either tax-deferred or tax-free growth on these assets.
How to Buy Physical Gold Through a 401(k) Plan
Most 401(k) plans will allow participants to roll funds over into an individual IRA account. While a regular Traditional or Roth IRA will not permit you to buy physical gold, a self-directed IRA account will. Provided that you roll your funds directly from your 401(k) plan into the IRA, there will be no tax or penalties due.
Once your funds are inside of your gold backed IRA, you will be able to purchase the allowable physical gold bars and coins that the IRS permits inside of these types of accounts. You will also be able to take advantage of the same tax benefits that are allowable with Individual Retirement Account investing.
Buying Physical Gold Through a Solo 401(k) Retirement Plan
Solo 401(k) plans can be established by those who are self-employed and owner-only businesses. Also, business owners who have a spouse that works either as a full-time or a part-time employee may also qualify for inclusion in a Solo 401(k). In addition, self-employed individuals may also be able to set up a Solo 401(k) plan if they have W-2 employees that work less than 1,000 hours per year.
These plans also have both a traditional and a Roth option. With the traditional Solo 401(k), contributions may be tax-deductible, and the earnings within the account grow tax-deferred. With the Roth, contributions are after-tax, however the earnings and the future withdrawals are tax-free.
Similar to regular 401(k) plans, a Solo 401(k) has annual contribution maximum limits. For 2016, this amount is $18,000 for participants who are age 49 and younger. Those who are age 50 and older may contribute an additional $6,000.
Can You Have Physical Gold in a Solo 401(k) Plan?
Participants in a Solo 401(k) may be able to invest in physical gold. This is because Solo 401(k) plans are not required to use a special, self-directed plan custodian. Therefore, depending on what type of institution manages the particular plan, there are actually a number of asset types that could be held – including gold and other precious metals.
How to Buy Physical Gold Through a Solo 401(k) Plan
If your Solo 401(k) plan is not able to hold physical gold – or, if you simply want more control over the funds that have accumulated in this type of plan – some or all of the money that is in the Solo 401(k) may be rolled over into a personal, self-directed IRA account.
Provided that the funds go directly from one account to the other, there will be no tax due on the transaction. In doing so, you will then be able to pick and choose from a wide array of both tangible and intangible asset types for the IRA account.
Buying Physical Gold Through a 457(b) Retirement Plan
A 457(b) plan is used primarily by state and local government entities. This can also include public school employees, as well as firefighters and police officers. There may also be certain non-governmental organizations that use these types of plans, including unions, charities, and hospitals.
The rules for participation in a 457(b) plan may differ, depending on whether the plan is being used in a government entity as versus a different tax-exempt organization. For example, if the plan is being offered by a government organization, then common law employees and independent contractors may participate. If, however, the plan is being offered via a non-religious tax-exempt organization, then independent contractors, as well as a select group of management or highly compensated employees may be included. Because there does not have to be a minimum coverage test, though, an employer may allow all other employees to participate as well.
These plans have both a Traditional and a Roth option. There is also an annual maximum contribution amount. In 2016, those who are age 49 and younger may contribute up to $18,000 and those who are age 50 and over may contribute an additional $6,000 in catch up contribution.
Can You Have Physical Gold in a 457(b) Plan?
The participants in a 457(b) plan are not able to purchase physical gold for these accounts. However, there may be a way to move the funds from a 457(b) plan into another type of plan that does allow the purchase of physical gold and other precious metals – depending on the type of entity the money is coming from.
How to Buy Physical Gold Through a 457(b) Plan
If you are a non-government employee who participates in a 457(b) plan, then the funds from this plan may only be moved into another 457(b) plan, and not into a personal IRA account. However, government employees are allowed to move their 457(b) money into either a new employer’s 457(b), 401(k), or 403(b) plan – provided that the plan accepts these types of transfers, as well as into a personal self-directed IRA account.
Government employees may also be able to just simply cash out their funds and then open a new self-directed IRA account in order to purchase physical gold. If going this route, however, it is important to re-invest the withdrawn funds within 60 days and not to use the funds for other purposes, as this could trigger a taxable distribution.
Buying Physical Gold Through a 403(b) Retirement Plan
A 403(b) plan – also known as a tax-sheltered annuity, or TSA – is used primarily by educational institutions and religious organizations, as well as other types of non-profit 501(c)(3) entities. The funds that go into a 403(b) plan are invested into one of the options that is offered by the sponsoring employer.
Typically, only an employer may make the contributions that go into a 403(b) plan. However, there are some plans that will allow an employee to make after-tax contributions into their account. These plans have both a Roth and a Traditional option.
So, if an employee makes a contribution into a Traditional 403(b) plan, then they won’t have to report these on their tax return. If, however, the plan is a Roth, then contributions go in after-tax, and that amount of income will need to be reported for that year. The amount of the contribution is capped at a certain maximum each year.
For example, in 2016, the most that an employee may deposit is $18,000 if they are age 49 or younger, and $24,000 if they are age 50 or over. The limit on annual additions – which is the combination on all contributions by both the employee and the employer – is the lesser of $53,000 or 100% of the employee’s compensation for the most recent year of service.
However, the individual 403(b) plan may allow for additional catch up contributions for employees who have at least 15 years of service with any of the following entities:
Public school system
Home health service agency
Health and welfare service agency
Church / Convention or association of churches
In this case, the amount would be the lesser of either $3,000 or $15,000, reduced by the amount of additional elective deferrals that the employee made in past years, or $5,000 times the number of the employee’s years of service for the organization, less the total elective deferrals that were made in early years.
Can You Have Physical Gold in a 403(b) Plan?
If you are a participant in a 403(b) plan, you won’t be able to hold physical gold inside of the plan itself. There is, however, a way that you can move some or all of the funds that are in your 403(b) plan in order to gain more control over the assets you invest in.
How to Buy Physical Gold Through a 403(b) Plan
If you have 403(b) funds that are from a previous employer, or you are retired, then you may be able to roll these funds over into a personal self-directed IRA account. In doing so, you will then be able to take advantage of purchasing physical gold for the account, and you will also be able to obtain the tax advantages such as tax-deferred (Traditional IRA) or tax-free (Roth IRA) that IRA investing allows.
Buying Physical Gold Through a Keogh Retirement Plan
Keogh plans are available to individuals who are self-employed, as well as to unincorporated businesses. The contributions that are made into a Keogh plan are typically tax-deductible – up to a certain percentage of annual income.
A Keogh plan can be set up as either a defined benefit or a defined contribution plan. A defined benefit plan will state the amount of benefits that will be received by the participant at retirement, whereas a defined contribution plan will allow a certain amount of contribution to be made into the plan each year. For 2016, that amount is either 25% of compensation or $53,000.
Can You Have Physical Gold in a Keogh Retirement Plan?
If you participate in a Keogh plan, you are not allowed to own physical gold inside of the account. But, you may be able to roll part or all of your funds into a personal, self-directed IRA account. This will allow you the ability to buy physical gold, as well as other types of tangible assets.
How to Buy Physical Gold Through a Keogh Retirement Plan
Provided that you roll your Keogh funds roll directly into the new self-directed IRA account, you will not be required to pay any tax or penalty on the transaction. You can then begin buying physical gold, as well as taking advantage of the many tax related benefits that come along with IRA investing.
Buying Physical Gold Through an ESOP (Employee Stock Ownership Plan) Retirement Plan
An Employee Stock Ownership Plan, or ESOP, is a type of qualified plan that is specifically designed to invest in the sponsoring employer’s stock. In many ways, an ESOP actually helps to align the employees of a company with the interests of its stockholders. This is done in order to encourage the employees to do what is in the company’s best interest, as the employee / stockholders will also benefit from a better performing company stock.
Typically, an employer is required to offer participation in an ESOP plan to all of its employees who are at least age 21 or older. An allocation may also be made with regard to the employee’s income. Those who are participants in an ESOP will become vested in their plan funds within three to six years. If the employee leaves the company, then he or she will receive their vested stock – and, the company is required to buy back the stock from the employee at a fair market price.
Like many other types of retirement plans, ESOPs have a traditional and a Roth option. Likewise, there will be an IRS early withdrawal penalty levied if funds are taken out of the plan prior to the participant turning age 59 1/2.
Can You Have Physical Gold in an ESOP Plan?
Because an Employee Stock Ownership Plan is concentrated on the shares of the offering company’s stock, participants who are in these plans are not allowed to have physical gold inside of an ESOP. There may be, however, a way to use the funds from an ESOP in order to purchase this type of asset.
How to Buy Physical Gold Through an ESOP Plan
In many cases, the funds from retirement plans can be rolled over into an individual IRA account. While the money in an ESOP can be rolled into another qualified retirement plan, the rules regarding distribution can differ from one employer to another. Therefore, if you are an ESOP participant, it will be important to inquire as to whether or not your particular plan allows you to do this.
Buying Physical Gold Through a Money Purchase Retirement Plan
Money purchase plans are a type of retirement savings vehicle that can be offered by both large or small companies. With this type of plan, both the employee and the employer can contribute, based on a percentage of annual earnings. At the time of retirement, the total amount of funds that are inside the employee’s account may then be used for purchasing a lifetime annuity that will provide income for that individual.
If a company offers a money purchase plan, then the employer must guarantee that a certain amount of contribution will go into each employees’ account every year. Like a traditional IRA or 401(k), the funds that are contributed into a money purchase plan are tax deductible, and the growth that takes place inside of the account is tax-deferred. The maximum contribution limit for 2016 on funds that may go into a money purchase plan is $53,000.
Withdrawals from a money purchase plan will be taxed at the participant’s ordinary income tax rate. If an employee takes a withdrawal from the plan prior to attaining age 59 1/2 – other than for a qualified disability or other qualified hardship – then the IRS will impose a penalty of 10% on the total amount that was withdrawn.
Can You Have Physical Gold in a Money Purchase Plan?
If you participate in a money purchase plan, you will not be able to purchase physical gold for inclusion in this account. However, you may still be able to take advantage of buying physical gold with the funds from this account.
How to Buy Physical Gold Through a Money Purchase Plan
Depending on the rules of your particular money purchase plan, you may or may not be able to roll funds into a self-directed IRA account while you are still employed. If you are able to open a self-directed or gold backed IRA and fund it with some or all of your funds from the money purchase plan, you will then be able to take part in the other tax advantages that are allowed with IRAs, and you will also open up your list of eligible investments significantly.
Buying Physical Gold Through a Profit Sharing Plan
Profit sharing plans, as their name implies, allow employees of a business to take part in the company’s profits. With this type of plan, employees receive a percentage of the profits based on either its annual or quarterly earnings. With a profit sharing plan, it is generally up to the individual employer how much they contribute – and in some years, this could be $0. The annual maximum amount of total contributions that may be deposited, in 2016, is $53,000.
As with many other types of employer-sponsored retirement plans, most people that have a profit sharing plan are only allowed to invest the funds into certain types of financial vehicles – such as stocks, bonds, and mutual funds.
Can You Have Physical Gold in a Profit Sharing Plan?
Profit sharing plans will not allow buying physical gold for inclusion in the account. But, even so, there may still be a way for you to purchase this type of asset – as well as other precious metals investments – using the funds from a profit sharing plan.
How to Buy Physical Gold Through a Profit Sharing Plan
While you can be penalized by the IRS with a 10% early withdrawal penalty for taking out funds prior to age 59 1/2, you may be able to rollover some or all of your profit sharing funds into a self-directed IRA account. In doing so, you will then be allowed to purchase physical gold, and to also take advantage of the many benefits that IRA investing can provide, such as tax-deferred or tax-free growth.
Buying Physical Gold Through an Annuity
An annuity is a contract that is set up between an individual and an insurance company. These financial vehicles can be appealing to investors – especially those who are in or nearing retirement – because they can guarantee a stream of ongoing income, regardless of how long the recipient lives.
Annuities can be structured in a number of different ways, based on how and when they are funded, as well as in how – and for how long – they will pay out funds to an individual in retirement.
For example, an immediate annuity is funded with just one lump sum of cash. This type of annuity will start paying out income either immediately or very soon after its purchase. A deferred annuity, however, will allow a contribution – or many contributions over time – but will not pay out income until a time in the future. The funds that are inside of a deferred annuity are allowed to grow tax-deferred.
There are several different types of deferred annuities. These include:
Fixed – A fixed annuity will generally offer its owner a fixed amount of interest that is credited on an annual basis. The rate of interest is declared by the offering insurance company. One of the key benefits to owning a fixed annuity is protection of principal, as well as knowing that you will have a fixed, known amount of income coming in regularly in the future.
Variable – Variable annuities allow their owners to take part in market appreciation through a number of different investment options. These underlying investments are held in sub-accounts, and they will often include mutual funds. While variable annuity owners can grow their accounts substantially, they can also face risk when the market goes down.
Fixed Indexed – Fixed indexed annuities have their return based on an underlying market index (or indexes), such as the S&P 500. These annuities will also often have built in protection for principal in the event of a market downturn.
Can You Have Physical Gold in an Annuity?
While you may be able to purchase gold stocks and / or ETFs (exchange traded funds) within a variable annuity, buying physical gold in any type of annuity is not permitted. It may, however, be possible to use your annuity funds to buy physical gold in certain circumstances.
How to Buy Physical Gold Through an Annuity
Those who own annuities within a pension plan and / or retirement IRA may be able to transfer these funds into a personal, self-directed IRA account. By having money in a self-directed IRA, you can open up your eligible investment options – which includes buying physical gold and other precious metals.
It is important to note that, even if you are allowed to make this type of a transfer, there can be certain limitations placed on the amount that may be rolled over and / or penalties. Working with a qualified self-directed IRA custodian can help you in determining the best option, based on your specific situation and the type of annuity that you have.
The Bottom Line on Buying Physical Gold in Retirement Plans
There are many different types of retirement plans that are available today. Some are sponsored by employers, while others may be opened and funded by individuals themselves. While a number of the regular retirement plans and IRA account options may not allow you to buy physical gold for inclusion in the account, there are ways to take more control of your retirement assets – which includes buying physical gold and other types of precious metals.
This is by opening a self-directed IRA account. By having a self-directed IRA, you can begin buying physical gold in order to diversify and take advantage of the many benefits that precious metals investing offers. And, by including these assets within an IRA, you will also be allowed to take part in the numerous tax advantages that these types of retirement accounts provide.