Precious Metals IRA Rules: What You Need to Know

When creating a retirement account, it’s important for you to have a well-diversified portfolio. One way to do this is to start adding precious metals, like physical gold, gold coins, and gold bars. You can hold physical gold, and other precious metals, in a gold IRA account.

Though having a gold IRA can be a great addition to your retirement plan, there are specific rules that are set by the IRS that must be followed if you want to take full advantage of the benefits available.

IRA-eligible gold can’t just be added to any retirement account, though. It has to be done via a self-directed Precious Metals IRA. You can have a precious metals Roth gold IRA, SEP IRAs (for owners of small businesses), and even traditional IRAs.  If this concept is foreign to you, here’s how it works.  (Read that first and then come back here to get more clarity on the rules.)

If you are considering a gold IRA, which is the common name for a precious metals IRA, there are a few rules that you will need to keep in mind:

Rule #1 – Only Certain Metals are IRA-Approved

There are many types of gold and other precious metals that you can add to your gold IRA investments, but not all of them. The IRS requires that metals included in IRAs has a purity of .995. So, coins like the South African Gold Krugerrand are not eligible. There is, however, one exception for precious metals investments into an IRA – American Gold Eagle coins. These are only .9167 pure, but the IRS allows them to be included in all precious metals IRAs including traditional and Roth IRAS and SEP gold IRAs.

In addition to having a minimum fineness requirement, the metal must be produced by a national government mint, an accredited assayer, refiner, or manufacturer.

Some of the approved precious metals that can be added to a self-directed IRA include:

• Gold American Eagle bullion and proof coins
• Australian Kangaroo coins
• Canadian Maple Leaf coins
• Austrian Philharmonic coins
• Many more!

Keep in mind that any coin, or actual physical gold, that is graded as a collectible, is not eligible for an IRA.

Rule #2 – You Can’t Add Metals You Already Own to a Gold IRA

If you already own some gold that you believe is IRA-eligible, you may think you can add them to your IRA. Unfortunately, the IRS does not allow that. In fact, there have been a lot of ads out there that imply you can do this.

The Commodity Futures Trading Commission has issued a warning advising against this.

You cannot transfer gold you already own to any IRA, including traditional gold IRAs, even if it meets the fineness and sourcing standards.

The IRS requires that all physical metals that are held in an IRA must be purchased through the account, itself.

You can fund a self-directed IRA in one of three ways:

• A direct transfer from an existing IRA, such as a traditional IRA account that holds paper assets, like mutual funds and stocks
• A rollover from a qualified retirement account, like a 401(k)
• Add cash to the account to open a fresh IRA

Once the account is funded with retirement savings, the IRA custodian you choose will purchase the gold from a precious metals dealer. Then the gold is sent to an Internal Revenue Service-approved depository where it is stored for you until you are ready to retire and take advantage of your financial future.

Keep in mind that like conventional IRAs, you might need to pay taxes, or use after tax dollars, depending on what type of IRA you choose. There are contribution limits, too, for the IRA owner, so keep that in mind, too. You want to do everything you can to avoid any prohibited transactions, too, which is why it’s important to work with a reputable company.

Rule #3 – Gold Bars, Gold Coins, Etc, Must be Stored in an IRS-Approved Depository

After you purchase gold for an IRA, they are a bit different than traditional investments. The gold will come in a physical form, but you can’t store it at home or in a bank safety deposit box. The IRS requires that when you hold gold in an IRA, that is must be held in a depository. If you keep your IRA gold at home, it is considered taxable income, and it comes with tax implications, like all early withdrawals.

You can store collectible gold, or investment gold, in your home, but it can’t be used for an IRA.

The metal that is used in an IRA is held in a depository until the owner reaches retirement age. Then, you can either withdraw the actual metal, or you can begin taking distributions and withdrawing funds from the account.

Rule #4 – You Can Take Physical Gold When You are Ready to Retire

When the account holder is 59 1/2, just like with traditional assets and retirement accounts, withdrawals are available without a penalty.

Depending on the the type of IRA you have, i.e. traditional IRA, Roth IRA, etc, some withdrawals are tax free, but if the IRA was funded with pre-tax dollars, withdrawal rules state that you will have to pay taxes on withdrawals.

When you make qualified withdrawals from an IRA account, and you choose to take the actual physical gold or other metals, like palladium bars, you can store them at home, you can sell them on your own, or you can pass the gold down to future generations.

Rule #5 – You Can Contribute to More Than One Retirement Account

Many Americans have a retirement account through their workplace, like a 401(k). In addition to this, you can also choose to contribute to another retirement account, like an IRA. However, you still have to stick to contribution limits.

As long as you don’t exceed that limit, which is based on your income level and age, you can contribute to all of your retirement accounts. A financial advisor can help explain this more, and check over your retirement strategy.

Having more than one type of retirement account, like a 401(k) and a precious metals IRA, gives investors a lot of diversity, which can help them have a solid financial future when they retire.

FAQs About Precious Metals IRA Rules

Is There a Tax Benefit to a Gold IRA?

There are tax advantages to a precious metals IRA. For instance, you get a tax deduction when you contribute. You can learn more by speaking to an investment professional to ensure that you are doing the right thing, and they can help you avoid penalties, higher fees, and provide other benefits.

What are Required Minimum Distributions?

Per IRS rules, the IRA owner must start taking minimum distributions from the IRA trustee at a certain age. Your first RMD must be taken by April 1st of the year following the year you turn 73.

How Much Does a Gold IRA Cost?

In general, a gold IRA requires some costs to set up. For instance, generally, there is a set-up fee and an annual fee, but some IRA companies offer these for free, as a promotion, at least for a year. There are also storage fees to keep in mind. A regular IRA doesn’t have these storage fees, but since you can’t have have physical possession of your metals, you don’t have much of a choice. Your investments, including gold held in the IRA, must be kept in an IRS-approved storage facility.

Are Precious Metals IRAs Safe?

Yes, a precious metal IRA is just as safe as a regular IRA, a Roth IRA, or a SEP IRA. Using alternative assets like metals is often even safer than traditional stocks, bonds, or money, because in times of economic uncertainty, precious metals tend to rise in value.

Am I too Old to Start Gold IRA Investments?

No. It’s never too late to start a gold IRA as long as you aren’t at retirement age. For instance, if you are in your 50s or early 60s, and you plan on working for 10-15 more years, you can still get a lot of benefits to investing in a gold IRA. Just keep in mind that you must hold the account at least five years per IRS rules.

What Precious Metals Can You Hold in an IRA? Gold or Silver? More?

There are four main types of metal that you can hold in an IRA: gold, silver, platinum, and palladium. Before you start purchasing metals, however, it’s important to check out the spot price, and ensure that you aren’t overspending on the metals. Many companies that sell metals for an IRA will add an upcharge to the metals. To get the most of your purchasing power, take some time to research prices.

Conclusion: Understanding Precious Metals IRA Rules

The rules for precious metals IRAs might be confusing. There is a lot to remember and to keep in mind as you navigate retirement. By making annual contributions now, you can begin to start saving for your retirement. Many people choose gold and other precious metals as they are a hedge against inflation, and they often help people feel safer during times of uncertainty.

The best advice I can give anyone considering a precious metals IRA is to do plenty of research and make sure this is the right step for you. It is a great option for many people, but not everyone.