Within the last year, 401(k)s and IRAs have ceased to be a safe haven for Americans’ nest eggs. In 2008, employees lost on average 14%, or about $10,000, of their retirement money. Those with more than $200,000 are even worse off – they lost more than a quarter of their savings. No wonder that more and more people are asking whether they can, or should, use an Individual Retirement Account (IRA) to hold physical gold bullion. Our answer to the first part of the question is yes, indeed you can. The tax rules governing IRAs leave room for gold. But our answer to the second part is equivocal.

Background

In 1986, as the U.S. Mint began issuing gold coins for the first time since 1933, a tax rule against holding “collectibles” in an IRA was relaxed to allow gold and silver Eagles. Later, in 1997, the Tax Payer Relief Act opened the IRA door for a broad spectrum of precious metals (gold, silver, platinum, and palladium), whether in the form of bullion or coin. The easier rules now apply to all types of IRAs, including traditional, Roth, Simplified Employee Pension (SEP) and Simplified Incentive Match Plans for Employees (SIMPLE).

The only stipulation is that all bars and all coins other than Eagles must be .995 fine. Thus Canadian Maple Leafs and Austrian Philharmonics qualify, but the South African Krugerrand, minted with an alloy, does not. Numismatic coins are also impermissible for an IRA.

Mechanics

The procedure for putting gold into an IRA is somewhat more complicated than with paper assets, but the requirements aren’t onerous.

To begin with, you have to find an IRA custodian that handles investments in metals, and they are few. Don’t look to your discount broker or a fund family like Vanguard; they won’t touch the stuff. Instead, you’ll need a specialist like the two original gold IRA custodial companies, American Church Trust (acquired by GoldStar Trust in 2007) and Sterling Trust. These are the most respected names in the business. An Internet search will turn up others, and if you do your due diligence on them, you might find one that works for you.

But remember that it’s especially important to choose a custodian with a solid reputation, because your gold will be stored at a location twice removed from you. A firm such as GoldStar or Sterling would be merely your IRA’s legal custodian; for vaulting your IRA gold, it will employ a certified depository, likely either HSBC Bank USA (which is also a COMEX gold depository) or Delaware Depository Services.

So chances are you’ll have to open a separate IRA for physical gold, which will be a matter of doing a little paperwork and paying some fees. Then you put money into your account and tell the custodian what to buy. (Dropping in coins you already own is against the rules – a “prohibited transaction.”) And if you want to mix in some paper – for example, to consolidate your gold, ETF, and mining stock holdings into one account – that’s fine, too.

The custodian will charge either a fixed annual fee or a percentage of the IRA’s value, with a ceiling. And the depository will charge its own fee for safekeeping. There also may be a transaction fee each time you add to your IRA. In all, you can expect the basic cost to run between $160 and $340 per year, depending on the fee structure of the custodian you choose.

You can make the same tax-deductible contribution each year to a gold IRA as with any other IRA. The current limit is $5,000, or a “catch-up” limit of $6,000 for those 50 and over. Custodians generally set their minimum initial investment at that $5,000 mark but will accept smaller subsequent contributions.

When the time comes to withdraw from your gold IRA, you don’t get any coins or bars, alas. You get cash. The custodian sells the gold and distributes the proceeds, with the money then taxed at your ordinary income rate, just as with any other asset held in an IRA.

Who Should Consider It

That takes care of the how-to. The trickier part is whether it’s a good idea. For most readers, the answer is likely no. Here’s why.

The idea behind a traditional IRA is twofold. First, reduce present taxes by taking a deduction upfront for your yearly contribution of $5K or $6K. Second, defer taxes on the investment income and gains that build up inside the IRA until after retirement.

Physical gold, of course, doesn’t generate income. So you might be wasting part of your IRA’s tax-saving power by filling it with gold instead of investments that earn interest, dividends, or trading profits.

Does that mean it never makes sense to have physical gold in an IRA? No. There are some situations when an IRA may be the right place to hold part or all of your investment in physical gold.

No-income portfolio. If you’ve decided that the outlook for bonds and dividend-paying stocks is so bleak that you don’t want any at all, then putting gold into your IRA won’t crowd out any income-earning investments.

Strategic switching. Perhaps you plan at some point, when you judge that the gold bull market probably has run its course, to liquidate part of your gold. Whatever gold you have in an IRA then could be sold and reinvested, with no loss to current tax, in something else.

IRA Only. If your IRA is the only investment vehicle you have, and you want gold, then using funds within the IRA to buy gold may be the only way for you to hold it.

Transfers and Rollovers

In researching this, we chatted with Glen Kirsch of Asset Strategies International, who has been dealing with gold and gold-related investments for more than thirty years. We asked Glen what would be the benefit of a gold IRA. His experience accords with our analysis of when putting gold in an IRA makes sense.

He said he rarely if ever sees people open a gold IRA just to deposit that five grand a year. What he does see is individuals making the flight to quality with their accumulated retirement assets. Say, someone with most of his wealth in a pension fund limited by a menu of poor investments is searching for a way out. If the individual is generally suspicious of paper investments, a gold IRA will look attractive.

Making the move is simple if the pension fund is already an IRA. You’re free to transfer funds from an IRA that’s invested in stocks or anything else directly into a gold IRA.

Or if the pension fund is run by your employer, when you leave (quit, retire, or get fired), you can roll your interest in the pension fund over into an IRA, without tax consequences, and use the money to buy gold. Consider looking into the gold EFT Market as well.

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As a tropical island the Caymans are seen as an island of open beaches, unwinding, and amusement. This archipelago of islands is usually not associated as a nation of finance and offshore banking, unlike Switzerland or Offshore banks in the Bahamas. More info is available here: Offshore investing

Having said that, long after you visit the beautiful and one of a kind ports in the Caymans, you will still be wowed by the Caymans offshore banking! Some have the misconception that banking offshore is bad. Some nations feel that anything offshore is associated with something seedy. However, the practice of international banking is very alive and well. There is nothing illegal about it either, as long as you are open with the tax man in your own country.

George Town, as the capital of the Caymans, is the biggest and most lucrative business center in the country. The Caymans have their own governmental system. It has its own system of banking privacy laws as well as a no-tax jurisdiction policy. The local government adheres to standard international laws for all offshore tax haven countries.

What is it that makes the Caymans such a choice offshore bank destination?

Most importantly, what you earn is totally tax free here! So you don’t have to worry about most any kind of tax, including estate tax! All this is yours if you have a special trust arrangement there.

Clearly, one of the most lucrative benefits aside from being tax free is banking secrecy. This keeps all of your financial information from prying eyes. Obviously, this freedom isn’t available to ones who live in countries like the UK. Wait a minute, what about the IRS? Well, yes, it’s true the IRS is very interested in your earnings and income. You can’t and shouldn’t hide the fact that you have money overseas tied up in business arangements. Only if the Supreme Court forces the issue will your banks privacy agreement be changed. That gives clients confidence that they will not be hassled by any legal entities. So there really isn’t anything to worry about since the odds of suspected evasion of taxes will probably never ever go to the Supreme Court!

Don’t forget that your assets are much more protected in an offshore environment. When you hold assets in America you are always at risk of losing them. Often this happens in job fields that are subjected to lawsuits and laywers beady eyes. Still, certain businessman have avoided that menace by creating an international corporation away from watchful eyes and civil bylaws. An offshore bank account gives the holder an open door to many international markets that would otherwise not have been open to them. As you might know, international markets offer competitive rates on mutual funds returns (due to the lack of taxes). It also makes the estate planning process go much more smoothly.

With advantages like these it’s no wonder that 50% of the world’s wealth is located in offshore institutions. The Caymans are an excellent place to start banking offshore if you are just wetting your feet in the field. The Caymans rely on this as a cornerstone of their economy and market. To find extra words of wisdom in this concern check here for a Overseas banking.

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Welcome to an international living experience, a place full of opportunity for fun and for a higher standard of living!

Greater and greater ammounts of people are discovering that moving abroad is just logical, not just from a fiscal point of view (cost of living is generally lower), but also for a better quality of life. While traditionally most people moving abroad have been retirees, communications now enable younger individuals and families to move anywhere. What could be better than working from a home office in a healthy location where you can safely bring up your kids… and enjoy time with them?

Multi-national individuals who earn their income in one country and live in another are becoming much more the norm, no longer being the rare eccentrics who scared bankers so much just a few years ago. You don’t have to look farther than Mexico for an inviting international lifestyle. Don’t believe everything you hear; There are many places in Mexico that afford a high quality of life like Puerto Vallarta, Mazatlan, Manzanillo, and many more.

It wouldn’t be right to have to step down in your standards. But the price of housing has become so ridiculously high in places like Big Cities or Urban areas, that you could likely cash out, take early retirement and live a much better life elsewhere, for less money. How does a rural house in the South of France, your tropical paradise on the Mexican riviera, a villa overlooking a Caribbean beach and a pied a terre on the ski slopes sound? If it lights your fire, then it’s within your reach

This is simply attainable fiscally speaking, you don’t need to hear that from me. Global high speed internet makes this sensible from a business view. Loved ones and family? Distance means nothing with today’s modern technology? Show them how much better life is where you are by flying them over? Invaluable is experiencing life in other parts of the world for children.

The US economy crisis and the sinking currency won’t keep them away. On the contrary, it will turn the stream into a river. Living internationally will become more popular as time goes by as more people realize the better way of life it affords. The declining US dollar also serves to make property in the Caribbean, Mexico, and Latin America. All of which is still very much dollar based, a better deal still for those with Euros, pounds and Canadian dollars in their pockets. They, too, are becoming more adventurous in their property purchases. Living abroad is a great way for you to protect wealth. The end result is more prosperity for the region and for you. All parties benefit.

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