How Do I Add Gold Coins to My IRA?
Gold IRAs are increasingly appealing among investors who look to precious metals as a safe haven against economic uncertainty, yet these IRAs carry higher fees and expenses compared to most other forms.
There can be fees associated with account setup, storage and insurance that quickly add up. Furthermore, there may be annual transaction and asset fees to consider as well.
1. Open a self-directed IRA
No one likes having limited choices when it comes to clothing or ice cream flavors, which is why self-directed IRAs were developed. This type of retirement account gives more freedom in how your money can be invested – such as in precious metals such as gold coins.
Contrary to traditional and Roth IRAs, which only permit indirect exposure to physical precious metals through paper assets, self-directed IRAs allow investors to directly purchase physical precious metal coins, bars, and bullions eligible for their IRA. This helps lower counterparty risk while giving greater peace of mind to investors.
When purchasing physical gold coins for an IRA, specific rules must be observed to comply with IRS regulations. Most importantly, coins should be acquired from an approved gold dealer and stored in an IRA-compliant depository.
2. Purchase the coins
Gold and other precious metals provide investors a way to diversify their retirement investments without the tax complications that can accompany other forms of investment vehicles, like stocks or bonds that pay dividends or interest payments. Instead, precious metals are valued for their long-term appreciation value that helps build long-term wealth for retirement investments.
Investors should note that the IRS restricts what types of physical precious metal coins they can hold in an IRA; for instance, gold IRAs can only hold bullion coins such as American Eagle that have been guaranteed by the government as to weight, content and purity.
Ideal IRA custodians will offer a list of approved dealers offering products eligible for inclusion into an IRA account, as well as facilitate transfer between dealers and depository storage depository facilities for your safety and convenience.
3. Store the coins
While collectible coins and artwork may be allowed in an IRA, the IRS only permits precious metal bullion that people value based on its metal content. While art or jewelry sell at auction due to attendance interest from attendees, a gold coin’s price depends on its weight and purity of material content.
Your IRA custodian purchases and stores the metals on your behalf at an approved depository. Although your IRA company may have relationships with specific dealers, you should do your own research in order to find one who adheres to industry trade groups like American Numismatic Association or Professional Numismatists Guild.
Keep in mind that storing gold bought through an IRA at home qualifies as an early distribution and could result in an IRS audit or 10% early distribution penalty if you are under 59.5. To avoid these hassles, it may be better to buy the metal outside your retirement account.
4. Report the purchases
Gold can add diversification and protection against inflation to an IRA portfolio, though like all investments it does carry risk such as price fluctuations and storage fees.
Your gold coin purchases will need to be reported to the IRS, usually handled by your IRA custodian. They will keep an eye on their value and place them within your investment strategy for tax purposes.
IRS rules limit IRA investments to precious metals meeting certain purity standards, and you must store your IRA-eligible precious metals in a depository that is both bonded and secure. Any time an IRA-eligible precious metals enters your possession–even temporarily–it will be considered a distribution by the IRS and taxed accordingly; to avoid this happening most IRA companies provide handoff of physical metals directly to depository which will maintain records confirming content, weight and purity of IRA-eligible precious metals.
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