Customers have a number of options when it comes to funding their precious metals IRA. As with other accounts, funding can be as simple as putting aside a few dollars every week until you’ve generated the necessary funds to purchase your investment piece. However, we at JM Bullion realize that most customers are searching for a more substantial means of funding their precious metals IRA such as the options described below.
One common way for customers to fund their account is by “rolling over” funds from an existing traditional IRA or Roth IRA. Unlike a “transfer,” which only allows funds to move between similar accounts, rollovers enable customers to move their assets from one type of IRA account to another. Both traditional and Roth IRA’s offer tax-free rollovers, but there are certain policies that need to be followed in order for the rollover to be tax exempt.
The primary policy that customers need to familiarize themselves with is the 60 day rule. Customers have 60 days after a traditional IRA contribution to transfer those funds to another IRA. Rollovers that occur after the 60 day period without an extension or waiver will be subject to standard income taxes.
Another option is for customers to move funds from an employer sponsored retirement account such as a 401k plan. When moving these funds, customers have a choice between using a rollover or a direct transfer depending on how much of their funds they intend to use. Direct transfers offer complete access to your entire 401k savings. In comparison, rollovers only provide you with access to 80% of your funds because the government is required to keep 20% of your account balance in the event of any income taxes incurred by your rollover. Furthermore, direct transfers allow your custodians to handle the responsibility of holding and liquidating your 401k assets instead of leaving these complicated matters to you.
Please keep in mind, however, that rollovers and direct transfers can only be applied to 401k funds from previous employers. If your current employer provides your 401k plan, you will not have access to these funds until you leave the company.
Lastly, customers also have the option of taking out a loan to fund their precious metals IRA. However, we advise customers to use this option only if they have the financial means to pay it off immediately. It can take time for their contributions to generate profits and customers who take out a loan with the intention of using the actual IRA contribution to pay it off may find themselves incurring a lot of debt due to the interest rates of the loan.
In contrast, customers who do have the financial means to pay off a loan quickly will find that they can take advantage of great investment deal even if they are temporarily short on funds. We strongly suggest consulting with an IRA custodian to make sure this is a suitable option for you prior to making any decisions.
Customers are by no means expected to restrict themselves to one single source of funding. In fact, we encourage you to find as many means of funding as you wish. This being said, it is important to remember that once your funds are transferred into your IRA account, there is no way to retrieve those funds without incurring any taxes or penalties. Therefore, customers are encouraged to speak with their financial custodian regarding which funding options are appropriate for both their short-term and long-term goals.