What Type of IRA is Used for Precious Metals?

A gold or precious metal IRA is an individual retirement account in which physical gold or other approved precious metals are held in escrow for the benefit of the IRA account owner. It functions similarly to a regular IRA, but instead of holding paper assets, it contains physical coins or bullion. You can purchase gold coins and bullion of gold, silver, palladium, and other precious metals that meet certain purity requirements with your IRA. The current law allows both IRA transfers and renewals of qualified retirement plans, such as 401 (k), 401 (a), 403 (b), 457, Thrift Savings Plan (TSP), and annuities. In general, an IRA investment in any metal or currency is considered the acquisition of a collectible item.

As such, the transaction is characterized as a taxable distribution of the IRA followed by a purchase of the metal or currency by the IRA owner (you). This general rule prohibits IRAs from investing in precious metals or coins made of precious metals. Investors with gold IRAs can hold physical metals such as bullion or coins, as well as securities related to precious metals within the portfolio. For instance, you might have an IRA that is invested in precious metal bullion and another IRA that is invested in liquid assets, such as publicly traded stocks and mutual funds. If you already have an IRA or 401 (k), you can fund an IRA by transferring the full or partial amount.

Gold and precious metal IRAs can be a good option for investors as long as they understand the steps and costs involved, says Daniel Milan, managing partner at Cornerstone Financial Services, LLC in Southfield, Michigan. Scott has a Certified IRA Services Professional (CISP) designation and leads engaging seminars and webinars that educate the public about the complexities of self-directed IRAs. Since the IRS considers gold and other precious metals to be alternative investments, they can only be held in self-directed IRAs. However, coins or bullion must be held by the trustee or custodian of the IRA rather than the owner of the IRA. As a result, gold IRAs require the use of a custodian, usually a bank or brokerage firm that manages the account.

The Taxpayer Relief Act of 1997 allowed individuals to use funds from their IRAs to purchase approved precious metals since 1998. A silver IRA is also a traditional IRA, a ROTH IRA, a SEP-IRA, a SIMPLE IRA, or an inherited IRA that is self-directed by the account holder and holds permissible forms of physical silver coins or silver bullion. Either way, both gold and bitcoin are alternative investments that have potential strategic places in your IRA. Custodians who offer a checkbook IRA structure primarily recommend that customers keep their IRA metals in a bank safe deposit box. Individual retirement accounts (IRAs) offer tax-deferred or tax-free growth, meaning that investments made with an IRA can grow larger than similar investments made outside of an IRA. If you are interested in setting up this type of account, you will need to find a custodian or specialized firm that is capable of handling all the tax documentation and reporting required to maintain a golden IRA. The Internal Revenue Service (IRS) allows self-directed IRA account holders to purchase bars and coins minted from gold or other approved precious metals, such as silver, platinum or palladium.

Rochelle Paker
Rochelle Paker

Personal finance specialist. Areas of expertise Banking, business, real estate, consumer credit, retirement accounts.

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