Can You Buy Precious Metals in an IRA?
Physical precious metals might seem like an appealing retirement asset for some individuals, but it is important to keep in mind that they should only form part of an overall diversified investment strategy and should never become too costly or illiquid to manage.
Gold and other precious metal investments are typically invested through self-directed IRAs with pretax funds.
How it works
Investment in precious metals through an IRA provides unique diversification and benefits, such as protection against inflation. However, these accounts tend to be more costly than other types of IRAs; investors should be wary of additional fees such as account setup and maintenance fees, transaction costs and custodial charges as well as shipping and purchasing fees that may apply when buying physical assets.
Investors should keep in mind that storing precious metals themselves would violate IRS rules and could face severe tax repercussions. Instead, those seeking exposure without incurring extra costs or hassle by opening a gold IRA may consider exchange-traded funds (ETFs) or mutual funds that track precious metal indexes and prices; such investments can be held within conventional retirement accounts such as traditional, ROTH, SEP or SIMPLE IRAs and can later be converted to precious metal IRAs if desired – but care should be taken when selecting such firms ensuring reliable custodians or depositories!
Taxes
Tax implications associated with precious metals held within an IRA can be complicated. The first issue lies in identifying eligible metals; such as gold bullion coins, bars and rounds made by accredited or certified dealers are eligible. Furthermore, any pieces held must be stored at a depository facility rather than being kept at home or other private storage locations.
Additionally, the IRS considers physical precious metals collectibles; therefore purchasing them in your IRA before turning 59.5 can count as a prohibited transaction and incur taxes and penalties. Therefore, it’s crucial that you conduct adequate due diligence on dealers that offer segregated storage to safeguard that your IRA assets do not become mixed up with inventory from other investors.
Make sure that you are aware that most precious metals dealers are unlicensed or registered to offer investment advice, and often receive commissions on sales of their products. Instead, seek guidance from financial professionals with fiduciary responsibilities who provide impartial recommendations and guidance.
Rollovers
As is true for other types of IRAs such as traditional pre-tax IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs, precious metals invested in an IRA can grow tax-free until you make qualified withdrawals. When cashing out, however, certain taxes and penalties may apply depending on your age and account type.
Investors looking to store precious metals in a rollover IRA should work with a company offering institution-to-institution transfers and look for dealers with appropriate licensing, insurance, certifications and customer service credentials – as well as having high customer repeat levels.
Sentell notes that precious-metals dealers who sell to IRAs may charge markups on sales costs for bullion and proof coins as well as additional storage and insurance fees; these costs can add up quickly; to protect investors, any IRA-approved custodian or dealer should disclose all fees prior to sale.
Dealers
Contrary to stocks, gold and other precious metals are physical investments. According to IRS rules, IRAs holding these precious metals must work with an approved dealer and storage facility when holding these investments; their custodian will send funds over to this dealer who will buy and store them securely with another facility; typically this means investors will not take physical possession of their precious metals due to this being considered prohibited under IRS rules.
Many IRA dealers maintain relationships with depository storage facilities or partner with an experienced storage provider to simplify the process for their customers. Many also offer precious metal products such as bullion bars, rounds and coins for clients’ consideration.
When searching for a precious metals IRA provider, make sure they offer transparent pricing on purchases as well as customer education that’s impartial. Some companies charge hidden fees that could add up over time so it is essential that you know exactly what fees will apply before making your selection.
Comments are closed here.