In a regular IRA, you can’t own physical gold, although you can invest in a wide variety of assets that are engaged in gold, such as stocks of gold mining companies or exchange-traded gold funds (ETFs). Second, you can’t keep the gold in your possession. Even though you are the owner, the gold must be stored off-site in an IRS-approved depot. Your Gold IRA custodian bank can help you recommend a suitable custodian bank for your investments.
Not all gold investments can be owned by an IRA. The basic rule is that an IRA must not own a collector’s item and precious metals are defined as collectibles, regardless of whether the investment is in gold bars or coins. Fortunately, there are exceptions to the general rule for gold, silver, platinum, and palladium, which are held in certain forms. The term Gold IRA refers to a specialized individual retirement account (IRA) that allows investors to hold gold as a qualifying 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.
A Gold IRA must be managed separately from a traditional retirement account, although the rules regarding things like contribution limits and payouts remain the same. Investors can open gold IRAs through a broker-dealer or another custodian bank. If you want to hold physical gold in an IRA, it can’t be your regular account. It must be a separate, special one called a Gold IRA.
The IRS has issued private letter rulings to the most important gold ETFs, which state that IRAs may own the ETFs. One unanswered question regarding these IRAs is whether the IRA account holder can physically take possession of gold, silver, or other precious metals. Still, a gold IRA can be a good option for investors who want to diversify their retirement accounts and also take advantage of the hedging benefits that the yellow metal offers over other financial assets, such as paper currency and stocks. If you’re interested in setting up such an account, you’ll need to look for a specialized custodian bank or company that is able to handle all the paperwork and tax reports needed to maintain a Gold IRA.
As long as there is gold on this earth, it’s not too late to open your own IRA for self-directed precious metals. Storing your IRA gold at home can be considered distribution, meaning you’ll lose your tax-deferred benefits and face a penalty if you’re under 59 ½ years of age. Gold coins, bars, and cartridges eligible for the IRA must meet a number of requirements set out in the Internal Revenue Code so that they can be stored in a self-directed IRA. If you want to hold physical gold in an IRA, the first step is to open a self-directed IRA (SDIRA), which you manage directly with a custodian bank.
This is a prohibited transaction as an IRA owner is not allowed to make any purchase or sale transactions with the IRA. You can set up the SDIRA either as a traditional IRA (tax-deductible contributions) or as a Roth IRA (tax-free distributions). Those using self-directed IRAs to invest in gold, silver, or other precious metals should contact an experienced, self-directed IRA lawyer. You probably also know that gold is a “collector’s item” and that IRAs are not allowed to own collectibles.
Once you’re 59 ½ years old, you can liquidate the precious metals in your self-directed IRA for cash or take physical possession of your gold and silver without penalty. Unlike withdrawing funds from a traditional retirement account, a gold-backed IRA allows you to have a strong physical asset in your hands, gold that you can keep, sell at a later date, use as currency in times of crisis, or pass on to family members.