A Precious Metals IRA is a type of Individual Retirement Account (IRA) that allows you to invest in physical precious metals, such as gold, silver, platinum, and palladium. Instead of holding traditional paper assets, this IRA holds physical bullion coins or bars. Like a regular IRA, it offers tax advantages and retirement savings benefits but with the added value of tangible assets.
Eligible Precious Metals
The IRS permits specific types of precious metals and forms of bullion in these IRAs. The metals must meet certain fineness requirements and be in approved forms. While “gold IRA” is a common term, a Precious Metals IRA can include silver, platinum, and palladium as well. Other terms used include “silver IRA,” “platinum IRA,” and “palladium IRA.”
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Purpose and Storage
Precious Metals IRAs are often used as a hedge against inflation and to diversify investment portfolios. The IRS requires that the physical metals be stored in a secure facility. Storage can be handled by the IRA custodian, or in some cases, a third-party depository that meets IRS standards.
History
The Taxpayer Relief Act of 1997 expanded the types of investments allowed in IRAs to include certain precious metals. This legislation enabled investments in gold, silver, and platinum coins, as well as bullion, beginning in 1998.
IRS-Approved Precious Metals
The IRS approves certain forms of precious metals for inclusion in IRAs. Although investment in collectibles is generally not allowed, there are exceptions for specific coins and bullion that meet fineness standards. Coins are often preferred over bars due to ease of sale and less risk of counterfeiting.
Accepted Precious Metals
- Gold: Includes American Gold Eagle coins, Canadian Gold Maple Leaf coins, and other approved gold coins and bars.
- Silver: Includes American Silver Eagle coins, Canadian Silver Maple Leaf coins, and other approved silver coins and bars.
- Platinum: Includes American Platinum Eagle coins, Canadian Platinum Maple Leaf coins, and other approved platinum coins and bars.
- Palladium: Includes American Palladium Eagle coins, Canadian Palladium Maple Leaf coins, and other approved palladium coins and bars.
Distributions
The rules for taking distributions from a Precious Metals IRA are similar to those for a regular IRA. Account holders can choose to sell their metals for cash or take physical possession. Both options will be subject to tax.
Storage Requirements
To comply with IRS rules, all IRA assets, including precious metals, must be held by a trustee or custodian, not by the individual account holder. The custodian must be a bank, federally insured credit union, savings and loan association, or another IRS-approved entity.
Checkbook Control Strategy
Some companies offer a checkbook control strategy where the IRA owns an LLC that buys and stores the metals. The IRS has not officially endorsed this strategy and has warned that it could lead to disqualification of the IRA.
Conclusion
The Precious Metals IRA is a valuable option for Gold IRA investors seeking to diversify their retirement savings with physical gold. Understanding the associated IRS regulations and working with a qualified IRA Custodian are key to maximizing the benefits of this investment type.
