Golden rules “The precious metal coins or bars must meet IRS fineness standards and must be held by the IRA trustee and not by the IRA owner, says Moy. In other words, no storing gold bars or other types in safes, home safes, or closets. Silver coins and bars must be 99.9% pure; platinum and palladium coins and bars must be 99.95% pure. The IRS sets these limits to ensure that investors buy high-quality metals that retain their value over the long term.
In general, an IRA investment in a metal or coin is considered an acquisition of a collectible item. Therefore, the transaction is characterized as a taxable distribution by the IRA, followed by a purchase of the metal or coin by the IRA owner (you). In fact, this general rule prohibits IRAs from investing in precious metals or coins made from precious metals. Gold IRAs are individual retirement accounts that hold physical gold as an investment instead of traditional stocks and bonds.
According to the latest PLR, the rules that prohibit direct IRA investments in gold do not apply if the gold is held by an independent trustee. Most gold IRA companies have relationships with top custodian banks and usually offer these services as part of their package. The IRS has issued private letter rules to major gold ETFs, which state that IRAs may own the ETFs. You can transfer all or part of the balance to fund a Gold IRA with no tax liability, as long as you complete the rollover within 60 days.
Once a traditional IRA owner reaches 72 years of age, the annual IRA minimum distributions (RMDs) must also be completed. You can invest in other options, such as stocks in a gold company, gold investment funds, or exchange-traded gold funds. Some very common types of IRA-approved gold include American Eagle coins and precious metals in proof and Canadian Maple Leaf coins. Many people who open gold IRAs use funds from another IRA to do so, but it’s not a good idea to convert your entire nest egg into a gold IRA.
A gold IRA rollover involves withdrawing money from another defined contribution account, such as an IRA, 401 (k), 403 (b), or a savings plan. Thankfully, the IRS now states that IRAs can buy shares in precious metals ETFs classified as grantor investment trusts without such problems. By setting strict parameters for defining IRA gold, the IRS can ensure that people hold investment-grade assets in their self-managed gold IRA, as opposed to collectibles, which are not eligible for any preferential tax treatment. While traditional IRAs, 401 (k), s, and the like are set up so that you can easily build a diversified retirement portfolio to mitigate risk, a precious metals IRA is dedicated to a single asset class.
If you need advice, you should contact a trusted advisor instead of relying on representatives from the Gold IRA company. As with other retirement accounts, if you withdraw gold from your IRA before you turn 59½, you must pay income tax on the value of the gold, plus a 10% upfront withdrawal penalty. Simplified gold IRAs for employees, also known as SEP Gold IRAs, are available to self-employed people and small business owners.
