A gold IRA or precious metals IRA is an Individual Retirement Account in which gold or other approved precious metals are stored, as opposed to paper currency or paper-based assets. It functions in the same exact capacity as a regular IRA, only instead of holding paper assets it holds physical bullion coins or bars. Companies selling precious metals IRAs often work with a private IRA services entity to act as a custodian for their clients, which may have its own fees and account restrictions. Precious metals IRAs are usually self-directed IRAs, a type of IRA allowing more diverse investments to be held in the account and giving the holder more control over those investments. Although most gold IRAs are self-directed IRAs, many other types of retirement accounts are eligible to be converted into a gold IRA, including Roth IRAs, Thrift Savings Plan (TSP), and 401(k)s.
The four precious metals allowed to be held in an individual retirement account are gold, silver, platinum, and palladium, provided they are in the form of IRS-approved coin or bar products. Since gold is the most commonly purchased of the four, the overarching term “gold IRA” is used most often in the industry to mean a retirement account containing any combination of precious metals. Depending on the portfolio contents and which metal is being marketed, the terms “precious metals IRA”, “silver IRA”, “platinum IRA”, or “palladium IRA” may also be used.
Investors often use precious metals as a long-term hedge against inflation, making them attractive to add to a retirement portfolio. In order to create one, the former retirement plan must undergo either a transfer or “rollover” process, which is IRS-approved and tax-free if the individual qualifies and all rules and regulations are complied with. The tax free gold IRA may be stored in an IRS-approved depository, and investors may have their metals shipped directly to them or liquidated for cash, depending on the depository and the company that sold the plan.
The Taxpayer Relief Act of 1997 broadened the permissible types of investments allowed in IRAs, stating: “Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. Beginning in 1998, your IRA can invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.”
IRA-Accepted Precious Metals
The IRS approves select precious metals and forms of bullion for IRAs. There are more advantages to holding gold coins as opposed to bars in a gold IRA in terms of liquidation. Gold bars are more difficult to sell due to their higher price and easier ability to be counterfeited, as well as being more difficult to deliver due to their heaviness and the amount of security required during transport. There are currently a variety of precious metals that meet the minimum purity requirements that are acceptable for inclusion into a gold IRA account.
American Gold Eagle bullion coins
American Gold Eagle proof coins
Canadian Gold Maple Leaf coins
Austrian Gold Philharmonic coins
Australian Kangaroo/Nugget coins
Chinese Gold Panda coins
American Gold Buffalo uncirculated coins (proofs not allowed)
Gold bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
American Silver Eagle bullion coins
American Silver Eagle proof coins
Canadian Silver Maple Leaf coins
Austrian Silver Philharmonic coins
Australian Silver Kookaburra coins
Chinese Silver Panda coins
Mexican Libertad coins
Silver bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
American Platinum Eagle coins
American Platinum Eagle proof coins
Canadian Platinum Maple Leaf coins
Isle of Man Noble coins
Australian Platinum Koala coins
Platinum bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
Canadian Palladium Maple Leaf coins
Palladium bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
The laws for taking distributions from a gold IRA are the same as those for a regular IRA. The account holder may liquidate their IRA metals for cash or take physical possession of them. Both actions are akin to taking an IRA distribution and will be taxed accordingly.
To comply with IRS requirements, all IRAs, including precious metals IRAs, must be in the possession of a trustee or custodian. Therefore, legally speaking, precious metals in an IRA are in the custody of the trustee or custodian, not the IRA owner. IRS Publication 590 specifies that for all IRAs, “The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian.” Many trustees/custodians use civilian (private) depositories, which may be approved by various commodities exchanges, for storing IRA metals. Security features may include timed locks and automatic re-locking features, 24/7 monitoring, and motion, sound, and vibration detectors. They typically have large insurance policies, with some amounting to as much as $1 billion. There are two types of Gold IRA Storage permitted in depositories: non-segregated, where your assets are mixed with the assets of others; and segregated, where your assets are held separately from other people’s assets.