Did you know that gold, silver, platinum and palladium, can be held within an Individual Retirement Account? As long as they are in treasury-approved coin or bar products you can hold precious metals in an IRA. Depending on the portfolio contents and which metal is being marketed, the terms “precious metals IRA”, “silver IRA”, “platinum IRA”, or “palladium IRA” may be used. However, because gold is the most commonly purchased precious metal for an IRA, the term “gold IRA” is used most often to refer to a retirement account that is made up of any combination of the permitted precious metals. A gold IRA is one that operates the same as a regular IRA; however, it holds physical gold bars or bullion coins instead of paper assets such as stocks or bonds.

Why You Are Allowed to Have a Gold IRA

Federal restrictions on owning gold were imposed in 1933 and lifted in 1975. In 1997, the Tax Payer Relief Act broadened investment holdings to allow IRAs to include one, one-half, one-quarter, or one-tenth ounce gold coins minted by the United States Treasury Department, along with certain foreign coins. This Act paved the way for gold, platinum, and silver to be added to IRA accounts, and ever since US investment opportunities have grown. Account holders added gold to their IRAs to diversify their funds, to protect retirement savings from a falling US dollar, and to a have long-term hedge against inflation. One of the most stable assets since ancient times, gold is sometimes considered the universal currency. Gold prices tend to rise as stock prices drop, so by adding gold to an IRA you can help stabilize portfolios when there is a weak stock market. This is why gold is an attractive addition to retirement portfolios.

IRA Code (IRC Section 408) prohibits an IRA from owning collectibles, which are defined as:

(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the Secretary for purposes of subsection 408(m).

However, an exception to the rule has been made for certain coins and bullion. IRC Section 408(m)(3) states that the term “collectible” shall not include:

(A) any coin which is—
(i) a gold coin described in paragraph (7), (8), (9), or (10) of section 5112 (a) of title 31, United States Code,
(ii) a silver coin described in section 5112 (e) of title 31, United States Code,
(iii) a platinum coin described in section 5112 (k) of title 31, United States Code, or
(iv) a coin issued under the laws of any State, or
(B) any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 7 of the Commodity Exchange Act, 7 U.S.C. 7) requires for metals which may be delivered in satisfaction of a regulated futures contract,
if such bullion is in the physical possession of a trustee described under subsection (a) of section 408.

Gold IRA Companies

With these very specific rules and regulations it is important that you choose the right IRA company for your precious metals IRA. Gold IRAs are typically self-directed IRAs that permit more diverse investments to be held in the account and give the holder more control over their investments. Although most gold IRAs are self-directed IRAs, other types of retirement accounts, such as Roth IRAs, Thrift Savings Plan and 401(k)s, can also be converted into a gold IRA.

Choosing a gold IRA company, or custodian, to manage your account is the first step to setting up a secure gold IRA. Many gold brokers will sell precious metals to your IRA but will simply refer you to or choose a third party custodian or administrator to hold gold in your IRA. Do your due diligence and research a company’s history and track record before contracting with them to act as your custodian. Some ways to research a company and ensure they are reputable are to check if they are accredited with the Better Business Bureau, check their Better Business Bureau score, see how many customer complaints the company has and check their Business Consumer Alliance and TrustLink ratings. You should also make sure the custodian is right for your gold IRA strategy. Most custodians will simply hold securities backed by gold, some custodians will hold physical gold but require that it be held in a depository such as Delaware Depository. With an IRA LLC you can choose to hold your precious metals locally, in a depository, in stock or all of the above.

Once you have completed your due diligence and chosen the right strategy, the custodian will set up your self-directed IRA, purchase IRS-approved gold on your behalf and store the gold in a secure facility. Again, if you choose the IRA LLC strategy you will have more options available and can simply buy the gold under your IRA LLC and decide where you would like it to be stored. The custodian can also help with rolling over an existing IRA into a gold IRA without having any tax penalties assessed. If you qualify and all rules and regulations are complied with, then the former retirement plan will go through an IRS-approved and tax-free transfer or rollover process. From here the tax-free gold IRA is stored in an IRS-approved depository or in some circumstances you could have the gold shipped directly to you and even liquidated for cash later down the road.

Do you have questions about gold IRAs and if it is the right investment for you? Contact us, and one of our IRA specialists will meet with you to discuss your goals and whether a gold IRA is right for you.