Is Gold Allowed in an IRA?
Gold has long been seen as an attractive investment choice, yet not everyone realizes they can buy physical gold with retirement funds. To do so, however, an IRS-approved custodian and depository must be involved for gold IRA coins or bullion investments.
IRS rules stipulate that precious metal IRAs may only contain bullion products which meet purity standards, as well as storage fees and insurance costs for investors.
Precious Metals Storage Options
The IRS has stringent rules regarding precious metal IRAs that require storage at a depository that meets certain security and insurance standards; home safes or personal vaults are therefore prohibited despite some fraudulent gold IRA companies advertising them as options.
Your IRA custodian purchases physical gold on your behalf and arranges its delivery to a depository of your choosing. Though the process may seem complex at first, they’ll provide help every step of the way.
Your IRA custodian will also determine whether you want your metals stored segregated or allocated storage. Segregated storage isolates your assets from those belonging to other individuals or companies, providing more secure storage that also requires keeping track of all IRA assets; however, this method could cost more in fees and storage space costs; plus it makes cashing out your metals harder because selling to dealers at wholesale rates may require extra time and paperwork.
Gold IRA investors tend to be concerned about currency collapse and seek an alternative form of money in the form of physical gold, but it’s important to remember that holding physical gold doesn’t save from taxes like owning stocks, mutual funds and ETFs; while the IRA account itself may be tax-deferred but distributions become taxable when retirement age arrives.
Gold IRAs can be established either traditionally or Roth-style and follow similar rules regarding contributions, withdrawals and taxes. Distributions prior to age 59 1/2 will be taxed as ordinary income while early withdrawals incur penalties of 10%.
Your precious metals IRA purchases should be handled through a reliable broker and managed with the assistance of both a custodian and depository for storage purposes. Allocated storage may be less costly; however, you will lose some control over its location and security.
When investing through a self-directed Individual Retirement Account (IRA), strict regulations dictate where physical coins, bars and bullion will be kept. Therefore, investors should avoid dealers who offer to help buy IRA gold at home or store it in safe deposit boxes as this would qualify as a distribution and trigger taxes and penalties.
Custodial services that specialize in IRA-eligible precious metals storage will likely provide the best results, as the IRS requires all IRAs-owned precious metals be stored at an approved depository that meets IRS regulations – this rule applies equally for traditional pre-tax IRAs, Roth IRAs and SEP IRAs. Furthermore, your dealer should not charge you fees to transfer or hold onto precious metals within an IRA account, nor annual maintenance fees; this can help save you money over time and may prevent charges coming due to increased price increases from storage facilities or storage fees charged by custodians. Finally, when selling back eligible gold to you this could mean paying more – even though prices have significantly since you purchased it originally.
Gold in an IRA offers specific tax advantages not available from other retirement investment accounts. Traditional gold IRA contributions are tax-deductible in the year they’re made, significantly lowering taxable income. Withdrawals from precious metals-backed IRAs will only be subject to your normal income tax rate in retirement rather than being charged an additional 28% collectible tax rate that applies when owning physical bullion.
As per IRS regulations, physical gold that qualifies for an IRA cannot be kept at home or stored in safety deposit boxes – this would constitute a distribution and be considered illegal by them. Instead, an IRA custodian must arrange a transfer from precious metals dealers to IRS-approved depository vaults – either segregated storage (separate from other investors’ gold assets) or allocated storage (keeping your metals within an aggregate pool of similar assets) is recommended – your preferred option may depend on your desired liquidity needs! Both methods provide secure solutions – ultimately, how quickly you need accessing your funds may determine your decision!
Categorised in: Blog