How Do You Hold Precious Metals in an IRA?
If you have either a traditional or Roth IRA, investing in gold and other precious metals through your retirement account is possible; however, you need to understand all of the steps and costs associated with investing.
First, you must open a Self-Directed IRA. Next, choose a dealer and custodian that offer eligible bullion and coins for investment into an IRA.
What is an IRA?
An Individual Retirement Account, or IRA, offers tax-deferred investments for people saving for retirement. An alternative to stocks and bonds.
Many investors turn to precious metals such as gold for an IRA because of their lower volatility and potential protection from inflation. Gold in particular is often seen as an ideal safe haven asset.
IRAs can store physical coins, bars or ingots of precious metals like gold, silver, platinum and palladium. You may also store foreign currency and artwork. However, the IRS limits which items qualify as eligible IRA investments; typically gold, silver platinum and palladium qualify as items you can put in an IRA.
If you decide to purchase precious metal items from a dealer, make sure that they have all of the following credentials: license, registration, insurance and bonds. Ideally they should provide evidence of these credentials upon request.
Eligibility
IRAs can hold coins and bullion that meet specific purity standards, but the IRS considers most precious metals more as collectibles than investments; as a result, the tax code treats precious metals as assets that should be held by an IRA custodian (such as a bank, credit union, brokerage firm or trust company) instead of themselves.
The IRA custodian will then send funds to a dealer who will purchase coins or bullion. Once purchased, this must then be delivered directly to a depository designated by the custodian of their IRA account.
When selecting a gold and precious metals IRA provider, look for one with clear fee disclosure and flexible investing solutions. Some IRA providers have relationships with certain dealers which they recommend or require; but you should do your own research prior to making any decisions based on them.
Taxes
As with other IRA investments, precious metal investments in an IRA account do not incur taxes while still held within it. However, their value could become subject to taxes when withdrawn or sold – as per IRS requirements, at age 72 all IRAs must take required minimum distributions (RMDs).
Coins and bullion that qualify for storage in an IRA must be stored with an approved depository, so many investors choose precious metals dealers that specialize in gold IRA management to connect them to a custodian who specializes in this area. They will also assist with selecting an approved depository; some dealers utilize what’s known as an LLC “Checkbook Control IRA”, in which your investment goes through an LLC that owns and stores precious metals; this structure should not be considered when holding physical metals inside an IRA account.
Withdrawals
A precious metals IRA follows the same regulations as any regular IRA, meaning that you can liquidate investments for cash and pay taxes and penalties when withdrawing distributions. You must ensure you purchase physical gold and silver assets approved by IRS standards – for instance bars hallmarked by NYMEX/COMEX refiners/national government mints as well as coins with minimum fineness such as the US Silver Eagle.
Typically, self-directed IRA custodians provide gold purchases and storage at approved depository banks; their annual fee covers your precious metals’ care and upkeep. You can also buy bullion from dealers directly and store it yourself.
Storage
Choose between home storage, bank safe deposit boxes, or private vault storage when choosing how to store precious metals for an IRA. Your goals and risk tolerance will ultimately dictate which is the most suitable option – be sure to factor in annual custodian fees as part of this decision process.
To invest in physical gold and silver, a self-directed individual retirement account (SDIRA) must first be opened. You should then work with an established precious metals dealer to select and purchase assets before your IRA custodian arranges storage at an approved depository facility.
IRS requirements dictate that an accredited trustee or custodian be responsible for administering your SDIRA investments, so it’s crucial that you choose one with transparent fees and services, in addition to seeking advice before opening one.
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