Funds can be sent directly from one custodian to another with no tax consequences. Reinvestment is the most efficient way to move from similar accounts, such as from one traditional IRA to another. There is no limit to the number of transfers that can be made in a calendar year. Rebalancing your IRA is the act of changing the assets or securities you own (i.e., rebalancing is not taxable when investments are held in an IRA, but is often taxable when held in a taxable brokerage account).
Early withdrawals from your IRA, before age 59 and a half, are not only taxable at ordinary income rates, but they also face a 10% penalty. You can make early withdrawals and still pay ordinary tax rates, but avoid the penalty if the money is used for certain purposes. Examples include using the money to buy a home for the first time and paying for unreimbursed medical expenses. Meanwhile, minimum distributions (RMD) are required. Distributions from a traditional IRA and other specific IRAs must begin when you are 73 years old if you were born between 1951 and 1959, or 75 if you were born in 1960 or later.
If an investor does not accept RMDs, a special tax of 50% will be charged on the required amount. For example, a spouse who inherits an IRA and has many years left before reaching retirement age may consider transferring those assets to their own IRA. The practical concern is to find an IRA trustee who is willing to create a self-directed IRA and facilitate the physical transfer and storage of precious metal assets. It used to be possible to recharacterize contributions to a Roth IRA as contributions to a traditional IRA within the same year, but new tax laws eliminated that option. Using an IRA to invest in precious metal assets becomes especially problematic when you are at or near retirement age.
For example, you could have an IRA that is invested in precious metal ingots and another IRA that is invested in liquid assets, such as publicly traded stocks and mutual funds. Fortunately, the IRS now states that IRAs can buy precious metal ETF shares classified as investment trusts from grantors without any such problem. Buying shares in an exchange-traded fund (ETF) that tracks the value of a precious metal is an option for those who don't want to face problems related to the physical ownership of coins or precious metal ingots by IRAs. Fortunately, the original owners of Roth IRAs are exempt from RMD rules, but beneficiaries who inherit a Roth IRA are generally required to accept distributions, and those rules depend on several factors. If you want to invest in precious metals or real estate in your IRA, then an investment fund or exchange-traded fund (ETF) may be a better option (although you may be subject to unrelated corporate taxable income, or UBTI). You can withdraw the annual amount in RMD from the liquid account and leave the precious metals account intact.
Additional fees may be charged for transactions that include contributions, distributions, and fees for purchases and sales of precious metals. As such, the transaction is characterized as a taxable distribution of the IRA followed by a purchase of the metal or currency by the owner of the IRA (you). In addition, once the owner of a traditional IRA turns 72, the annual minimum distributions (RMD) required by an IRA must be made. The account is a traditional IRA at the beginning of the transfer and is a traditional IRA at the end of the transfer process. Only a few companies are willing to act as self-directed IRA trustees containing permitted precious metal coins or ingots.
You can transfer part or all of your holdings in your current retirement account, and the custodian of your current account will liquidate your holdings before transferring funds to your gold IRA or sending you a check to deposit into the new accumulated gold IRA.
