Physical gold may be eligible to be added to an Individual Retirement Account, though only through certain types of accounts. A regular IRA only permits investments such as stocks, bonds and mutual funds while self-directed IRAs allow alternative assets like real estate and physical gold as investments.
To buy physical gold for an IRA, first open a self-directed account with a custodian and find an approved precious metals dealer who provides IRS compliant products stored at an approved depository.
Taxes
If you want to purchase physical gold for an IRA, it’s essential that you understand the rules and regulations set by the Internal Revenue Service (IRS). According to these regulations, only coins certified as eligible by an NYMEX refinery (such as COMEX or LME) or national government mint may qualify. Furthermore, certain rare proof coins (such as uncirculated varieties) cannot be kept within an IRA account.
Precious metals eligible for storage within an IRA must also be stored in an approved depository to preserve its tax-deferred status. You should not take physical possession of them before retirement; doing so would constitute a distribution and incur taxes and penalties as a result.
Many of the best gold IRA companies provide storage services in safe, insured facilities that offer regular reporting and access to your investment. Furthermore, some may provide segregated storage solutions so your assets won’t become mixed up with those belonging to other investors, providing invaluable protection from theft or damage to your IRA investments.
Liquidity
When investing in physical gold, you need a secure place for its storage – whether that means home safes, bank safe deposit boxes or depository facilities – but when investing through an IRA account this responsibility falls on someone else, making ownership simpler and cost-cutting.
Care should be taken when selecting an IRA company; some dealers charge hidden one-time and annual fees that could diminish your return. To make sure that you receive maximum value from your IRA investment, select only dealers who sell IRS-eligible gold (must be produced at an IRS-approved mint and meet certain face value standards; examples include American Gold Eagles and Buffalo bullion coins as well as certain foreign gold coins that meet IRS standards).
Security
A gold IRA allows investors to add physical precious metals (gold, silver, platinum and palladium) to their retirement accounts. To do this, investors must use an independent custodian who specializes in precious metals investments as well as invest in gold bullion bars or coins that meet IRS purity requirements and store the metals at an approved depository.
Bullion coins that qualify as IRA investments must have a purity level of 99.5% or above and be produced by an official government mint, ruling out popular choices like the American Eagle, South African Krugerrand and British Sovereign coins. Gold bullion bars must meet an approved fineness level produced by an accredited refiner or assayer.
Note that any IRA custodian you select to manage your precious metals must be independent from the dealers you work with, since those typically act as salespeople who earn commission based on product sales and may not always act in your best interests like a fiduciary would.
Convenience
IRS rules do not allow Individual Retirement Accounts (IRAs) to invest in collectibles; rather, an investor must open a Self-Directed Individual Retirement Account (SDIRA). A custodian will allow an investor to purchase precious metals.
Gold coin investing within an SDIRA often requires selecting an approved dealer, sending precious metals directly to an approved depository, and working with professionals throughout the process.
Notably, metals-based IRAs typically incur much higher fees than their traditional counterparts due to the fact that bullion does not generate income or dividends for investors. Furthermore, storage fees tend to be more costly for physical assets; plus these additional expenses can reduce how much a traditional IRA can actually grow over time. These higher costs could limit how much an investor can grow.
