A gold IRA, or precious metals IRA, is a type of Individual Retirement Account where physical gold or other approved precious metals are
held for the benefit of the account owner. Unlike a regular IRA that holds paper assets, a gold IRA holds physical gold, silver, platinum, or palladium. These IRAs are usually self-directed, allowing for a wider range of investments.
Eligible Precious Metals
The IRS allows gold, silver, platinum, and palladium in IRAs, provided they are in approved coin or bar forms. The term “gold IRA” is often used broadly to refer to any IRA holding these metals. Other terms like “precious metals IRA,” “silver IRA,” “platinum IRA,” or “palladium IRA” are also used.
Purpose and Storage
Investors use precious metals in IRAs as a hedge against inflation and to diversify their portfolios. The IRS requires these metals to be stored properly. Some trustees have their own storage facilities, while others use third-party depositories.
History
The Taxpayer Relief Act of 1997 expanded IRA investment options, allowing investments in U.S. gold and silver coins, and later, in certain platinum and other precious metals.
IRS-Approved Precious Metals
The IRS approves specific precious metals and forms of bullion for IRAs. Although collectibles are generally not allowed, certain coins and bullion that meet fineness standards are permitted. Gold bars are harder to sell and more prone to counterfeiting compared to coins, which may also affect their value and security.
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Accepted Precious Metals
- Gold: American Gold Eagle coins, British Gold Britannia, Canadian Gold Maple Leaf, and other specified gold coins and bars.
- Silver: American Silver Eagle coins, Canadian Silver Maple Leaf, and other specified silver coins and bars.
- Platinum: American Platinum Eagle coins, Canadian Platinum Maple Leaf, and other specified platinum coins and bars.
- Palladium: American Palladium Eagle coins, Canadian Palladium Maple Leaf, and other specified palladium coins and bars.
Distributions
Rules for taking distributions from a gold IRA are the same as for a regular IRA. Account holders can either convert their metals to cash or take physical possession. Both options are subject to taxation.
Storage Requirements
All IRAs, including precious metals IRAs, must store their assets with a trustee or custodian, not in personal possession. The trustee or custodian must be a bank, federally insured credit union, savings and loan association, or an IRS-approved entity.
Checkbook Control Strategy
Some companies offer a checkbook control strategy where the IRA owns a limited liability company (LLC) that buys and stores the metals.
The IRS has not officially endorsed this method and has warned that it may risk IRA disqualification.
Conclusion:
Gold IRAs offer a valuable opportunity for retirement planning through the inclusion of physical gold in an investment portfolio. Investors should consult with a financial advisor to explore how a Gold IRA can fit into their overall retirement strategy.
