However, there are specific rules for the types of gold and precious metals you can invest in with a self-directed IRA. The term gold IRA refers to a specialized individual retirement account (IRA) that allows investors to hold gold as a qualified retirement plan. Investors with gold IRAs can hold physical metals such as gold bars or coins as well as securities related to precious metals in their portfolio. In general, an IRA investment in a metal or coin is considered an acquisition of a collectible item.
Therefore, the transaction is characterized as a taxable distribution by the IRA, followed by a purchase of the metal or coin by the IRA owner (you). In fact, this general rule prohibits IRAs from investing in precious metals or coins made from precious metals. You can store coins or gold bars in a precious metal IRA. Despite the colloquial term “gold IRA,” you can hold silver, platinum, and palladium in this account.
If you want to have your gold valued, it’s usually better to wait until you’ve liquidated your IRA assets and taken possession of your metals. Unfortunately, most Gold IRA companies don’t have a good record of fee transparency on their websites, so finding out the details may require a phone call or two. For this reason, your IRA Gold custodian bank will allow you to transfer your physical metals to a secure warehouse, a so-called depot. The basic rule is that an IRA cannot own a collectible and precious metals are defined as collectibles, regardless of whether the investment is in gold bars or coins.
Unlike gold ETFs or gold company stocks, a precious metal IRA allows you to hold the physical precious metals in accordance with IRS regulations. According to the latest PLR, the rules that prohibit direct IRA investments in gold do not apply if the gold is held by an independent trustee. Ideally, keep your gold and other precious metals in your Gold IRA until you retire, as these accounts are designed for that. As a result, gold IRAs require the use of a custodian bank, usually a bank or brokerage firm, to manage the account.
There are plenty of rules and regulatory hurdles that you’ll need to overcome if you’re thinking about buying a Gold IRA. According to the Retirement Industry Trust Association, the custodian is a financial firm that is tasked with carrying out investment activities and administrative tasks required to maintain your IRA’s status with the IRS. This is critical to maintaining their tax status. The custodian is responsible for securely storing your gold and precious metals until you ask your IRA gold custodian to sell or distribute your gold to you. Annual fees are generally charged by the account custodian, and storage and insurance fees are more often owed to the custody account than to the Gold IRA company.
However, the coins or gold bars must be held by the IRA trustee or custodian and not by the IRA owner. Gold is generally regarded as an inflation hedge and allows investors to diversify their portfolios. They sell gold coins, gold bars, and the like, but they don’t offer IRA investment advice (regardless of what their websites or other marketing materials might suggest). To avoid running afoul of tax rules for proprietary transactions, self-governing IRAs, including gold IRAs, must have an IRS-approved custodian bank.