A gold IRA or precious metals IRA is an Individual Retirement Account in which physical gold or other approved precious metals are held in custody for the benefit of the IRA account owner. It functions the same as a regular IRA, only instead of holding paper assets, it holds physical bullion coins or bars. Precious metals IRAs are usually self-directed IRAs, a type of IRA where the custodian allows more diverse investments to be held in the account.
The four precious metals allowed to be held in an individual retirement account are gold, silver, platinum and palladium, provided they are in the form of IRS-approved coin or bar products. Since gold is the most commonly purchased of the four, the overarching term "gold IRA" is used most often as industry slang to mean a retirement account containing any combination of precious metals. Other terms such as, "precious metals IRA", "silver IRA", "platinum IRA", or "palladium IRA" are also frequently used.
Investors often use precious metals as a long-term hedge against inflation, to diversify their portfolio. Internal Revenue Code requirements state that the approved precious metals must be stored in a specific manner. Some Trustees have in-house facilities to custody the physical precious metals, others use a third party metals depository as a storage facility.
The Taxpayer Relief Act of 1997 broadened the permissible types of investments allowed in IRAs, stating: "Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. Beginning in 1998, your IRA can invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion."
IRA-accepted precious metals
The IRS approves select precious metals and forms of bullion for IRAs. Although investment in "Collectibles" using IRAs and Qualified Plans is not allowed, there is a carve-out allowing for investment in certain coins, as well as bullion meeting certain fineness requirements. There are more advantages to holding gold coins as opposed to bars in a gold IRA in terms of liquidation. Gold bars are more difficult to sell due to their higher price and easier ability to be counterfeited, as well as being more difficult to deliver due to their heaviness and the amount of security required during transport. There are currently a variety of precious metals that meet the minimum purity requirements that are acceptable for inclusion into a gold IRA account. Some gold IRA companies argue inclusion of certain coins in a precious metals IRA; however, several of those companies have been investigated by the government for misleading customers and aggressively selling numismatic coins over gold bullion. Numismatic coins pay the gold company higher commissions, but bullion bars more directly reflect the spot price of the precious metal.
- American Gold Eagle bullion coins
- American Gold Eagle proof coins
- British Gold Britannia coins (from 2013)
- British The Queen's Beasts (coin)
- British gold Shēngxiào Lunar Series (British coin)
- Canadian Gold Maple Leaf coins
- Austrian Gold Philharmonic coins
- Australian Kangaroo/Nugget coins
- Chinese Gold Panda coins
- American Gold Buffalo uncirculated coins (proofs not allowed)
- Gold bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
- American Silver Eagle bullion coins
- American Silver Eagle proof coins
- British Silver Britannia coins (from 2013)
- British The Queen's Beasts (coin)
- British silver Shēngxiào Lunar Series (British coin)
- Canadian Silver Maple Leaf coins
- Austrian Silver Philharmonic coins
- Australian Silver Kookaburra coins
- Chinese Silver Panda coins
- Mexican Libertad coins
- Silver bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
- American Platinum Eagle coins
- American Platinum Eagle proof coins
- British The Queen's Beasts (coin)
- Canadian Platinum Maple Leaf coins
- Isle of Man Noble coins
- Australian Platinum Koala coins
- Platinum bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
- American Palladium Eagle bullion coins
- Canadian Palladium Maple Leaf coins
- Palladium bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
The laws for taking distributions from a gold IRA are the same as those for a regular IRA. The account holder may liquidate their IRA metals for cash or take physical possession of them. Both actions are akin to taking an IRA distribution and will be taxed accordingly.
To comply with IRS requirements, all IRAs, including precious metals IRAs, must be in the possession of a trustee or custodian. Therefore, legally speaking, precious metals in an IRA are in the custody of the trustee or custodian, not the IRA owner. IRS Publication 590 specifies that for all IRAs, "The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian." Many trustees/custodians use civilian (private) depositories, which may be approved by various commodities exchanges, for storing IRA metals. Security features may include timed locks and automatic re-locking features, 24/7 monitoring, and motion, sound, and vibration detectors. They typically have large insurance policies, with some amounting to as much as $1 billion. There are two types of sold IRA storage permitted in depositories: non-segregated, where your assets are mixed with the assets of others; and segregated, where your assets are held separately from other people's assets. All nonbank IRA trustees must demonstrate to the IRS that they will meet Treasury standards of accounting, auditing, reporting, and asset security.
With such stringent custody requirements, an investor has little chance of successfully acting as trustee for their own gold IRA. Neither the IRS nor federal courts have recognized any "self-storage" arrangement for keeping gold IRA assets in the investor's home or a safe deposit box. The IRS has warned that such unconventional arrangements carry a risk of disqualifying the IRA.
- "Publication 590" (PDF). UncleFed's Tax Board. Internal Revenue Service. Retrieved 2 June 2014.
- "26 U.S. Code § 408 - Individual retirement accounts". Cornell University Law School. Retrieved 21 April 2014.
- IRC §408(m)(1) - https://www.law.cornell.edu/uscode/text/26/408
- IRC §408(m)(3) - https://www.law.cornell.edu/uscode/text/26/408
- "The Pros & Cons of Buying Gold Bars vs. Ingots vs. Coins". munKNEE.com. Retrieved 23 April 2014.
- "26 U.S. Code § 408 - Individual retirement accounts". Cornell University Law School. Retrieved 27 August 2014.
- "IRA FAQs - Investments". Internal Revenue Service. Retrieved 2019-11-03.
- Sanders, Laura (September 2, 2016). "Want to Keep Gold in Your IRA at Home? It's Not Exactly Legal". The Wall Street Journal. Retrieved 2019-11-03.