Hold physical Gold in a Retirement account

If you're convinced of the benefits of investing in physical Gold and Silver and also the benefits of using a tax-advantaged IRA, you may think you have a dilemma. While it's true many traditional brokerages don't allow you to hold physical Gold or Silver in your IRA, it is possible to have a Gold Retirement account with the same advantages. You just need to open a Gold IRA.

Physical Gold IRA guide

When most people think of an IRA, they think of an Investment account that holds Stocks and Bonds. This is true, but there are many different types of IRAs. There are also IRAs that hold Real Estate, loans to startup companies, Bank savings deposits, and Precious metals.

A Gold IRA is an IRA the holds Precious metals. Even if you only hold Silver, it's still normally called a Gold IRA just because that's how investors in this area refer to IRAs set up under the IRS regulations allowing accounts to hold physical Gold and Silver.

There are two aspects to a Gold IRA. First, you need to have a legal IRA set up on paper. Second, you need to properly store your physical Gold, Silver, or other Precious metals in compliance with IRS tax rules.

Finding a Gold IRA Custodian

To have a legal IRA, you need to have a Gold IRA custodian. The custodian is kind of like a mix of a lawyer and an accountant. They create accounts in a way that meets the IRS regulations and they report required information, such as your account contributions and distributions to the IRS.

Most physical Gold IRA custodians charge an annual maintenance fee to do the paperwork. Some may also offer storage options, but most will require that the Precious metals be stored at a separate storage company.

A Gold IRA is a type of self-directed IRA. Self-directed basically means that you can hold asset types, like Gold, that you can't hold in a traditional brokerage account. It also means that you invest without getting a broker's advice on what to invest in. However, the IRS paperwork involved means that you still need to use a Custodian to set up the account instead of just saying that some of your assets should be treated like an IRA.

Gold IRA storage options

There are three options for self-directed IRA Gold storage.

Depository companies

There are numerous Depository companies that are in business expressly for the purpose of storing and insuring valuable assets.

Banks

There are banks that take Gold and other Precious metal deposits. It's important to understand that this is different from opening a Safe deposit box and storing your Gold in there. A Safe deposit box does not meet the IRS tax rules because you have unrestricted access to whatever you store in it. The banks have their own separate Gold depository for Gold IRAs, and will report your transactions as required by the IRS.

Home storage Gold IRA

This is generally not a good idea. The reason is that your Gold can't be directly in your possession according to IRS rules. There is a potential loophole where you can try to set up a Trust or LLC to hold your Gold and keep it in your home. However, the IRS has never expressly allowed or disallowed this option. Even if you got all the paperwork right, they could still rule that the Gold was effectively in your direct possession and disallow your IRA.

Gold Coins held inside an IRA

A Gold IRA can hold both bars and Coins. Gold, Silver, or other Coins present additional Investment options as they may have a collectible value in addition to the weight of the metal alone.
There are two types of Gold Coins to be aware of.

First there are Coins that actually circulated as currency prior to 1933 when all Gold was withdrawn from circulation. These Coins are referred to as “Numismatic Coins” and they have value based on their rarity and the amount of Gold that the Coin contains.

The second type of Coin is produced by government mints. They typically have a face value stamped on them but they have never circulated as actual currency. These Coins are called “Bullion Coins”. National mints in the US, UK, Canada, Australia, Austria, Mexico, China, and South Africa produce Bullion Coins.

The IRS states that Numismatic Coins cannot be held in a Gold IRA so you will only be able to choose from Bullion Coins. Despite this IRS restriction, there are still collectible Coins that can be held in your Gold IRA. These Coins are called “proof Coins” and they are collectible because they are produced in limited quantities. There are also special edition proof Coins that often come in fancy boxes and have certificates of authenticity.

Some investors question whether proof and special edition Coins are a good Investment choice. These Coins are substantially more expensive than Bullion Coins and there are no guarantees that they will hold their purchase price, much less increase in price.

If you choose to hold Gold Coins, it's important to understand what type of storage your Depository uses. There are commingled and segregated options.

Commingled storage

Commingled means that all of the investors' deposits are placed together. If you deposit Gold bars, you will get back the same number and type of Gold bar but not necessarily the exact same Gold bars. If you deposit American Gold Eagle Coins you will get back American Eagles but they may not be the Coins you deposited.

Segregated storage

Segregated means that your deposits get stored in their own separate area. You will always get back the exact same items you put in.

The storage type is especially important with Coins because the condition of the Coin can have an impact on its value. If you expect to be able to sell a Coin for more because it's in mint condition, you don't want to place it in commingled storage and get back a Coin in worse condition.

Physical Gold IRA tax rules

There are a few tax rules you should know for using a physical Gold IRA.

  • A Gold IRA counts towards your annual contribution limit. Assuming the 2022 limit of $6,000, you can put $6,000 into a Gold IRA or $6,000 into a Stock brokerage IRA but not both. You could divide that $6,000 between your IRAs, though. For example, $3,000 into each.
  • You can use a traditional Gold IRA that gives you a tax deduction for your contributions. This tax-deferred account is funded with pre-tax money. When you withdraw from the account in retirement the withdrawal will be taxed as ordinary income. Tax-deferred accounts benefit individuals who have lower tax rates after retiring.
  • You can use a Roth Gold IRA that lets you avoid any taxes on your retirement withdrawals by making an after-tax contribution today. This tax-exempt account is preferred by people who think their tax rate will be the same or higher during retirement.
  • You can only deposit cash in an IRA. If you already own Gold or Silver outside of a Retirement account, you have to sell it, deposit the cash in the Precious metal IRA account, and buy new metal.

IRA to Gold IRA rollover guide

One exception to the usual Gold IRA tax rules applies when you want to buy physical Gold using money from your existing IRA. The IRS rules allow you to convert an IRA to physical Gold. To do this, you need to rollover your IRA to a Gold IRA.

A Gold IRA rollover allows you to move part or all of your IRA to a Precious metal IRA. There are no taxes or penalties for making this move but you can only perform one move per tax year. One common reason for a rollover is because you want Investment options that aren't available in your existing IRA.

To rollover to a Gold IRA, you follow these simple steps:

Step 1

Pick a Gold IRA company to work with

Step 2

Setup the Gold IRA account

Step 3

Contact the Custodian of your existing IRA and request a rollover. Let them know how much of your IRA you want transferred to your Gold IRA.

Step 4

Once the rollover transaction processes, you can freely buy Gold and other metals within your Gold IRA.

Conclusion

To invest in physical Gold and Silver using your tax-advantaged retirement savings all you have to do is open a self-directed Precious metal IRA. This account, commonly called a Gold IRA, allows you to purchase and hold a wide variety of Bullion Coins and bars.

The process of setting up a Gold IRA is fairly simple. Basically, you pick a Gold IRA company to work with and then request that funds be transferred from your existing Retirement account to the new account. When the Gold IRA is funded you pick the bars and Coins you want to hold and they are shipped to a Depository for secure storage.

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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