There are several rules and regulations governing gold IRAs that every investor should be familiar with. From what precious metals are allowed in an IRA, to where they get stored, the IRS has very specific laws regarding every aspect of a precious metals IRA.
Below, we have put forth a comprehensive guide for you that will go over the rules, regulations and even the process of getting your IRA, 401 (K), or other retirement accounts, backed by precious metals.
Gold IRA: The Key Players
Before we start with the process, there are 4 key players you need to familiarize yourself with, who are very intimately involved in a precious metals IRA.
- You – the Self-Directed IRA (a.k.a. Gold IRA) account owner.
- Precious Metals Dealer– The firm from whom you buy the IRS approved precious metals from. Make sure you deal with a firm who is familiar with all the intricacies of a gold IRA. And will not only provide you with the IRS approved precious metals, but will also take the reins on processing your IRA or 401k to gold IRA rollover on your behalf. For our most trusted Gold IRA Company, click here.
- Precious Metals IRA Custodian– Also known as a trustee, a precious metal custodian is an IRS approved financial institution who is in charge of safekeeping of the assets. This minimizes the risk of theft and damage. In a self-directed IRA, a custodian also makes transactions on behalf of the account owner, and distributes the assets based on owners’ direction.
- Precious Metals depository-Refers to a financial institution that is legally allowed to store your precious metals for security purposes. IRS prohibits owners from taking physical possession of the metals, until you are ready to take distribution. There are definitely tell-tale signs to look for when seeking the safest depositories. Keep reading.
Precious Metals IRA: The Process
- For adding precious metals into your retirement account, you need a Self-directed IRA. This is simply a type of IRA that allows the owner, instead of the custodian, to invest in IRS approved non-traditional assets of their choice. In other words, the owner has full control over which assets the funds get directed to. A Self-directed IRA can be a Traditional IRA, Roth IRA, SEP-IRA and Simple IRA. All IRA transfers are tax free.
- To initiate the transfer process, your precious metals dealer should send you an investment direction authorization form through email or fax. Once signed electronically, they will begin the transfer by sending the form to your current custodian, where they will transfer the requested funds to your newly setup self-directed IRA. You, the owner, will be kept up to date through every step of this process through regular phone calls and/or emails.
- Once the account is funded, your account executive will get in touch with you to go over all the available options for precious metals that you can purchase. Once you decide on a product, your price will be locked in then and there. Only deal with a trusted precious metals dealer so as to insure that there are no hidden costs or surprise price increases.
- Once the precious metals are paid for, they will be delivered to the depository within 7 business days after which you will be notified of its receipt. Some of the more prestigious firms allow you to then track the progress of your account online 24×7. It’s very convenient.
Precious Metals IRA: Rollover vs. Transfer
Although sometimes used interchangeably, there exists a difference between a rollover and a transfer.
An IRA rollover refers to a shifting of funds between two different types of retirement accounts. For example: 401(K) to Gold IRA. A rollover can be subjected to federal income tax deductions unless the rollover gets completed within 60 days, or if the funds are rolled over from the same IRA more than once in a given 12 month period.
An IRA transfer refers to a process where the funds get moved between two of the same type of retirement accounts. For example: Traditional IRA to Traditional IRA. In this case, the transfer is direct, from one trustee to another. There are no limits on the number of transfers and all of them are exempt from tax deductions.
What precious metals are allowed in a Gold IRA?
Under Internal Revenue Code 408(m), it’s stated that collectibles cannot be stored as investments. It defines collectibles as a work of art, any metal or gem, any rug or antique, any stamp or coin, any alcoholic beverages and other tangible personal assets.
The IRS does specify however that you can invest in 1, ½, ¼, or 1/10 oz Gold and coins, as well as 1 ounce Silver coins that are minted by the US Treasury Department. Along with that, you can also invest in certain platinum coins, and gold, silver, platinum and palladium bullion.
Numismatic and American Eagle Coins that have undergone certification, also known as slabbed coins, are not permissible in the gold IRA.
There are minimum fineness requirements that need to be adhered to for all precious metals. These are as follows:
- Gold- 0.995+
- Platinum- 0.995+
- Palladium- 0.995+
Small bullion bars, which are bars smaller than 400 ounce gold, 100 ounce gold, 1000 ounce silver, 50 ounce platinum and 100 ounce palladium, must be produced exactly to the weight specification.
Below are the types of Gold, Silver, Platinum and Palladium that are permissible in an IRA:
- American Eagle Coins
- Australian Kangaroo/Nugget Coins
- Austrian Philharmonic
- Canadian Maple Leaf Coins
- Uncirculated U.S. Buffalo Gold Coins
The only bars and rounds that are permitted are the ones produced by a manufacturer accredited by NYMEX/COMEX, NYSE/Liffe, LME, LNMA, ISO 9000, or the national mint. They also need to meet the minimum fineness requirements mentioned above.
- Uncirculated American Eagle bullion and proof coins
- Australian Kookaburra coins
- Austrian Philharmonic coins
- Canadian Maple Leaf coins
- Silver Brittania Coin
The only bars and rounds that are permitted are the ones produced by a manufacturer accredited by NYMEX/COMEX, NYSE/Liffe, LME, LNMA, ISO 9000, or the national mint. The silver also needs to meet the minimum fineness requirements mentioned above.
- Uncirculated American Eagle coins
- Australian Koala coins
- Canadian Maple Leaf coins
- Isle of Man Noble coins
The only bars and rounds that are permitted are the ones produced by a manufacturer accredited by NYMEX/COMEX, NYSE/Liff e, LME, LNMA, ISO 9000, or the national mint. The platinum also needs to meet the minimum fineness requirements mentioned above.
The palladium bars and rounds that are permitted are the ones produced by a manufacturer accredited by NYMEX/COMEX, NYSE/Liff e, LME, LNMA, ISO 9000, or the national mint. They also need to meet the minimum fineness requirement mentioned above.
Storing of the Precious Metals
Investors are not allowed to take possession of the precious metals until distribution during when it becomes fully taxable. Your Gold IRA custodian will be responsible maintaining the account and storing the metals in a safe IRS approved depository. All IRA custodians are not required to accept every type of asset which is why it is important to check if your custodian accepts the metal you are interested in investing in.
Again, it’s crucial that you only work with a precious metals firm that regularly deals with precious metals IRAs. They already have their systems in place. Your metals will be stored in a depository with a multi-layered security system, high security vaults and state of the art locking devices. You can rest assured that your metals will be safe.