Can I take physical possession of Gold in my IRA

Investors are scanning the current economic environment and feeling nervous.

Stock markets have been inflated to nosebleed levels over the past decade but that run appears to be ending.

Interest rates are rising sharply while the Federal Reserve is threatening additional increases at the next several FOMC meetings.

The traditional 60/40 Portfolio of Stocks and Bonds is facing a two-pronged attack as both asset classes fall in value at the same time.

Economic conditions are further threatened because geopolitical tensions are rising dramatically and supply chain issues are worsening.

Investors are understandably anxious about their retirement savings. They are looking for ways to diversify and protect their Portfolio of Stocks and Bonds.

Unfortunately, most asset classes have been inflated to bubble levels in recent years so there are very few choice when it comes to alternative Investments.

Gold and Silver have been mostly out of favor since 2012 which leaves them tremendously undervalued today relative to other asset classes.

Many conservative investors are considering Precious metals as an alternative Investment and currently asking this question:

“Can physical Gold be held in an IRA?”

Because of the 1997 Taxpayer Relief Act, the answer is,

“Yes! Physical Gold can be held in an IRA.”

This sweeping tax relief Bill allowed investors to purchase and hold physical Gold and Silver in their self-directed IRAs. In 1998 Platinum and Palladium were added to the list of permitted metals.

How does a Gold IRA work

IRAs (Individual Retirement Accounts) were created in 1974, including self-directed IRAs which had a wider range of permitted asset classes.

Despite the IRS rules, self-directed IRAs were limited to just Stocks, Bonds, and Mutual funds because those products were the only ones offered by the Investment management companies. Investors were unable to take full advantage of self-directed IRAs until 1997.

After 1997 asset classes like rental Real Estate and Precious metals were permitted in IRAs and Investment management companies started to offer IRA accounts that could hold these assets.

One of the most important IRS rules to understand is that the physical metal held in an IRA must be held by an IRS-approved third-party Custodian.

That means you won’t be able to hold your Gold at home if you want to purchase it using money from your existing Retirement accounts. A Gold IRA is the only way to purchase physical Precious metals using tax-advantaged funds.

In a self-directed Gold IRA the investor purchases physical Gold and that metal is held in their name by a third-party Custodian. This is the same arrangement as you have with the Broker-Dealer who holds your Stocks, Bonds, and Mutual funds. Whether the asset is Precious metals or a security, it is held in your name by the Custodian or Broker-Dealer.

Gold IRA tax rules

The Taxpayer Relief Act enacted several important Gold IRA tax rules:

  • Gold, Silver, Platinum, and Palladium Coins and bars were now allowed
  • Metals must be of Bullion quality (99.5% pure) or better
  • Collectible or Numismatic Coins are not allowed
  • Metal that the Investor already owns cannot be moved into the IRA. Only newly purchased metal can be held in the account
  • Physical metal can be distributed from the account or the metal can be sold to make a cash distribution
  • Distributions are taxed as ordinary income at the investor's current tax rate instead of the 28% tax rate for Collectible Coins

Besides these rules that apply specifically to physical Precious metals, the IRS treats Gold IRAs the same as a traditional IRA holding Stocks and Bonds.

Precious metal IRA rules

These points relate to the Precious metal IRA rules and how they interact with other Investment accounts.

  • Investors are allowed to have more than one IRA account open at any given time
  • Opening a Gold IRA does not affect existing Retirement accounts
  • Investors can move funds from one tax-advantaged account to another without penalty
  • Only one account rollover or transfer is allowed in any given tax year

The bottom-line is that Gold IRA investors can move some or all of their existing retirement savings into physical Gold without paying any taxes or penalties in the process.

Gold IRA fees

There are several fees that occur in a Gold IRA that don’t occur in traditional IRAs. The difference is caused by the physical metal held in the Gold IRA.

Precious metals can only be bought and sold by licensed Broker-Dealers and these agents charge a fee for their service. To set up a Precious metals IRA the investor will pay a Broker fee to purchase the metal that will be held in the account.

After they have been purchased these valuable physical assets have to be securely stored. And, as a reminder, the IRS requires that a third-party Custodian hold the metal. That means somebody (the investor) has to pay an annual fee to securely store the Precious metals held by the IRA.

When it is time to make a distribution from the Gold IRA account the investor has two choices. They can elect to receive the physical metal held in the account or they can sell the metal and take a cash distribution. To sell the metal the investor will pay another Broker fee but this fee can be avoided by distributing the metal instead of cash.

 Here are the three Gold IRA fees to be aware of:
  • Broker fee to purchase metal
  • Secure storage fee
  • Broker fee to sell metal

Because all of the Gold IRA companies have to charge these fees (or absorb them as an overhead expense) we can use the fees as a comparison factor when we are selecting the best company to work with.

Home storage Gold IRA

As you are researching Gold IRAs you may see advertisements for Home Storage Gold IRAs.

In a home storage Gold IRA the investor is supposed to create an LLC to act as the third-party Custodian who holds the metal in the IRA. This Custodian then elects to hold the metal in a safe in the investor’s home.

Obviously this strategy is intended to skirt around the IRS rules governing Precious metals IRAs.

If you choose to walk down this path understand that it is an extremely high-risk strategy and be very careful using it. The IRS will be looking for any reason to disqualify the Custodian (the LLC) of the IRA and if they succeed in doing so the entire IRA will be void and the investor will be subject to back taxes and penalties.

Benefits of Gold IRA

The primary benefit of a Gold IRA is that it represents the only method for purchasing physical Precious metals using tax-advantaged funds.

A Gold IRA is NOT the best Gold Investment available.

Unfortunately for investors in tax-deferred retirement plans (401k, 403b, 457, TSP, IRA, etc.) their money is essentially stuck inside some kind of IRS-approved Investment vehicle until they reach retirement age (59 ½ in most cases).

Typically the only Investment products offered in these retirement vehicles are Mutual funds of one flavor or another. Investors have very few choices and zero opportunity to diversify their accounts into alternative Investments.

Because tax-advantaged retirement funds are going to be stuck somewhere, a Precious metals IRA represents an opportunity for investors to diversify and protect their retirement savings.

What is a Gold IRA rollover

A Gold IRA rollover is the simplest ways to gain tax-advantaged ownership of Precious metals.

In general, funds can be rolled into a Gold IRA from these types of Retirement accounts: eligible 401K, 403b, 457, Traditional IRA, SEP IRA, TSP, Annuities, Pension plans.

Unfortunately, only funds from an eligible 401K account can be used to fund a Gold IRA.

"Eligible" means the 401K account is from a previous employer that the investor no longer works for. 401K accounts provided by a current employer are not eligible for the Gold IRA rollover process.

Gold IRA reviews

Investors can perform due diligence by reading online Gold IRA reviews.

Gold IRA reviews can be found on these sites:

Negative reviews are OK as long as the company is working to resolve the issue. 

Best Gold IRA

These factors can be used to select the best Gold IRA company to work with:

  • A+ rating at Better Business Bureau (BBB)
  • 10+ years in business
  • Insured storage
  • Segregated storage for metals

Conclusions

Rising Inflation and mounting World tensions make it more important than ever to hold Precious metals.

Investors are finding that they can hold Gold in an IRA and they are moving their retirement savings into physical Precious metals.

A self-directed Gold IRA lets investors purchase physical Precious metals using money from their tax-advantaged Retirement accounts.

This is a great solution for investors who want to gain the protection of physical Gold without adding any new money to their retirement savings.

About Satori Traders

Satori Traders LLC is a California-registered Investment Advisor specializing in the Precious metals.

Bryan V Post is a California-registered Investment Advisor Representative and the founder of Satori Traders.

Bryan has worn numerous hats during his life: Engineer, Portfolio manager, Precious metals Investor, Technical analyst, Proprietary trader, Swing trader.

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