Let´s go through the Gold IRA Rules and Regulations so you can get a better overview. Hopefully, it can help you to plan out how to acheive your own investing goals. Ok, with that being said, let´s look into it!
When you want a secure financial future
Some people like to invest in precious metals as a way to provide financial security when they retire. However, they do not always understand the rule surrounding ownership of those precious metals.
One way to prepare for your retirement is to invest in a Gold IRA. This form of retirement savings allows you to invest in precious metals like gold, silver, palladium and platinum. As long as you meet and follow all the rules the IRS has set out governing this investment.
Gold IRA rules to follow
The key rule is to make sure you do not buy gold, silver, or other precious metals yourself. While you get to select which items you want, your custodian or administrator must make the purchase for you and handle them until they are in storage.
Then those coins must be kept in storage until you reach the age of 59 and 1/2. The IRS rules on storage are also very strict and all metals you buy must be stored in accordance with those rules and guidelines.
Part of those rules means that you cannot touch them at any time until you are over 59 1/2 unless you want to pay penalties and taxes on those gold or silver coins. be prepared to pay an annual storage fee for every year you have your gold IRA in effect.
You will see the cost when you select the depository from a list of approved depositories when you set up your account. The depository may store your metal coins with other clients’ coins or you can ask to have them stored separately. The latter may incur another fee for convenience.
Annual contribution and penalties
Prior to reaching age 50, you can make annual contributions to your gold IRA up to $6000. After you have passed this age barrier, you can add another $1000 as a catch-up contribution to the annual contribution limit of $6000. This means you can add in $7000 worth of precious metals every year if you want.
The metals you contribute must remain in your gold IRA until you reach the age of 59 1/2. You can leave the money in there if you want at that time but by the time you reach the age of 70 you must start taking money out of your account.
if you are not patient and can’t wait till that time, and you withdraw money from your gold IRA, you will be subject to IRS taxes and penalties. There will be a 10% penalty for early withdrawal and a 28% capital gains tax placed on the profit of the money you withdrew.
There are exceptions to this rule. Those exceptions are as follows:
- you have become disabled
- you do not have insurance or savings to cover medical bills once you are hospitalized
- you have died and your heir needs to withdraw the funds
- you have become unemployed and cannot pay for insurance
- you have set up identical amount equity withdrawals also called substantially equal periodic payments for the remainder of your life
- you are paying for education expenses, tuition, books, room and board, and so on, for yourself, spouse, or child
- you need $10,000 to purchase your first home
Withdrawing your funds from your gold IRA
The process is fairly simple and straight forward. The first step is to tell your custodian that you want to withdraw some of the coins from the IRA. Then you will have to fill out some paperwork for the transfer from the depository to your home.
If this is an early withdrawal, you will pay a penalty but if it is not you can go to the depository and pick up your metals yourself. You just have to show some i.d. Before you do this process, it would be wise to talk to a lawyer who has expertise in these matters.
Setting up a gold IRA
The good news here is that it is not hard to set up a gold IRA account. However, there are some different aspects to this form of retirement savings that you have to be careful not to violate. If you violate them you will be breaking different laws which can incur penalties.
But these problems can be avoided as long as you follow the right steps and make the right choices:
#1. Creating the IRA
In this first step, you will be faced with several choices. The first choice will be deciding if you want a Roth or a traditional IRA. Both options let you place precious metals in these accounts.
That permission leads you to step number two in this initial step. You will have to choose which precious metals you want to store in the account. The choice lies normally between gold and silver, and if you wish, in some cases also palladium, and platinum can be included.
The final aspect of this first step is to learn how you can pass any remaining precious metals on to your heirs without any problems.
#2. Picking the custodian
The IRS is fairly strict here in that you cannot have control over the account or those precious metals. You have to select a registered custodian or administrator and the best one to pick is a precious metal dealer.
These custodians get better prices for precious metals than banks or other custodians can. Plus, they can provide better storage facilities than other custodians can.
**See further down on this page for my best recommended gold IRA custodians
#3. What can be deposited into these accounts
This is where it gets a bit tricky. You are not allowed to deposit any gold, silver, etc., you already own into your account. This law is strictly followed. However, you are allowed to sell those stores of precious metals for cash, then turn around and buy more from the dealer you selected as your custodian
The precious metals that you can store in these gold IRAs must be 99.9% pure, but they cannot be rare coins nor coins deemed to be numismatic collectible. While Some countries like America, Canada, China, Australia, and Austria have struck coins at that level or higher, some are allowed to be stored while others are not.
There is a long list of what is or isn’t allowed to be stored in those gold IRAs. Some exceptions do apply though. It does get complicated as for silver you can add in certain Mexican Silver Libertad bullion coins but for palladium, you can only store Canadian bullion.
#4. Storing the bullion or coins
The key issue here is not to have the coins and bars in your possession at any time or the IRS will treat those coins as having been distributed. Once they make that classification, they will assess taxes and penalties on them.
What this means is that you cannot store your precious metals in your private safe in your home or in a safe deposit box under your name at your bank. if you do try these storage options you will be in violation of the law.
The registered custodian does not store the precious metals for you. Their duty is to oversee their management. They can assist you in the paperwork, sell you the coins, etc., and deliver them to the storage facility you have already chosen.
This process and the laws were designed to protect you from unscrupulous custodians.
This is a very complicated area and you should speak to a financial expert on these matters. Rest assured, you or your heirs will have to pay taxes on the transfer.
Multiple Account Ownership – Can I open a gold IRA alongside a 401(k)/traditional IRA/Roth IRA?
A common concern amongst those who want to open a gold IRA is whether they can still hold on to their other retirement plan. The IRS allows for multiple IRA ownership, which in itself creates a window of opportunity for investors to diversify their portfolios in a bid to mitigate potential risks. This means that in addition to contributing to your gold IRA, you can still contribute to any of the other plans under your name.
This does not mean that you can now proceed to max out the contribution limits on each retirement plan. The IRS requires that you only contribute that maximum total allowable limit for all your retirement plans throughout the tax year. For this, I would highly recommend that you consult a tax advisor, for them to help you understand what your overall contribution limit is, and how it will affect your taxes.
Chart of IRS approved gold & silver metals for gold IRA:
|Gold coins||Silver coins|
|American Eagle||American Eagle|
|Australian Kangaroo or Nugget||Australian Kookaburra|
|Austrian Philharmonic||Austrian Philharmonic|
|Canadian Maple Leaf||Canadian Maple leaf|
|Credit Suisse gold- PAMP Suisse gold bars .999||Mexican Libertad|
|US Buffalo Gold Uncirculated (no proofs)||Bars and rounds*|
|Bars & rounds*|
Not all types of gold can be used in a gold IRA. The IRS has outlined some strict rules with regards to the bullion pieces that qualify. Generally, there are some very high minimum purity standards for the gold that you purchase and place in your retirement savings plan. It is hard to come across any collectible coin being used for investment purposes through a gold IRA. Beyond that, you have to purchase your IRA gold from a government mint, or any other IRS-approved foreign mint.
For the gold sourced from the U.S. Mint, there are some special exceptions to the minimum purity rules. The IRS gold IRA rules require that investors only place gold that has full 24 karats purity. The coins sourced from U.S. mints are, however, allowed to have a purity of 22 karats, to accommodate gold investment products such as the Gold American Eagle Coin.
With IRA-approved gold from foreign mints, however, it is necessary that the products meet very high purity requirements ( they are set at 99.5%). For the other IRA products that are allowed for use in investment purposes, the purity requirements are as highlighted below:
- Silver – 99.9%
- Platinum – 99.95%
- Palladium – 99.95%
* See the authorized list of all the exact coins, bars, and rounds you can place in your gold IRA
Choosing the right custodian
This is even more tricky than setting up your gold IRA as far from all custodians are reputable or come with a glowing reputation. The best thing to do is to get a list of custodians and then research and compare them.
Look at reviews, complaints, and other pertinent details before selecting one to handle your investment. You are taking a big risk trusting someone else to handle your precious metals so you need to make sure of the person and their honesty, etc., before you hire them.
P.S. Read my recommendation a little further down on this page to get a good start on your research
Gold Ownership at Home – Can I hold my gold At Home?
The IRS only allows gold IRA investors to hold the gold in the safes at their homes at the end of the IRA term. Upon hitting 59 ½ years, you have two options as a gold-IRA holder:
- Liquidate the assets in the self-directed IRA
- Request to have the IRA-approved gold sent to your preferred address, so you can take physical possession of it, without getting penalized by the IRS.
The second option is quite unlike what those who hold traditional IRAs get, in that one can walk away with a powerful physical asset that they can then hold on to, and even pass on to their future generations. In addition to that, one can turn to their physical gold in times of crisis such as war and political unrest, and use it as currency.
Frequently Asked Questions on Gold IRA Rules and Regulations
1. Am I required to pay tax on my gold investments?
Yes. If you are earning profit from your gold investment, then the IRS will require that you pay all the due taxes. You can either pay your taxes before purchasing your gold ( a Roth Gold IRA), or after completing your IRA term ( a traditional Gold IRA). Remember to consult with your tax advisor before putting your signature on the dotted line, in a bid to establish the tax implications of your investments.
2. Do early withdrawal rules apply to gold IRAs?
Early withdrawal rules apply to all types of IRAs, including gold IRAs. Anyone who begins to take withdrawals from their IRA early (before hitting 59 ½ years) gets assessed a 10% penalty on their investments. This rule applies to all funds that are invested before taxation. Things are different for retirement plans in which post-tax dollars are used for investment purposes. One may not get penalized for withdrawing their contributions from such an account before hitting 59 ½ years, but they may get penalized for withdrawing their capital gains or earnings less than 5 years from the time they placed their assets in their account.
3. Do Required Minimum Distribution Rules Apply to Gold IRAs?
Yes. Whereas you have the option not to start taking withdrawals upon hitting 59 ½ years, the IRS requires that you begin taking withdrawals upon hitting 72 years. This applies to the traditional Gold IRAs. The RMDs start in the year you turn 72 years and must be taken every other year by December 31 of every year. Your very first RMD may however be postponed to April 1 of the next calendar year. All IRA owners are required to take the right amount of their RMDs, failure to which they get hit with a 50% tax penalty on the amount they were to take as their RMD.
4. What is standard liquid distribution?
This is the process through which you liquidate your gold assets at the time you are taking your distributions ( instead of having the physical gold sent to your preferred address). The gold IRA owner will, in this case, receive their payment in the form of a check, wire, or ACH, depending on the available options. If you are working with a reliable gold IRA company, they should give you top dollar for your gold assets. It’s, therefore, a good idea to do some research about the company you’ll open your gold IRA with, to ensure you get the best-possible payout at the end of the IRA term.
Some final words
Investing in precious metals is a fine way to build a retirement nest egg. The key to doing this investment option correctly is to learn all the rules involved and follow them.
Violating the rules will remove a lot of your investment and give it to the government so be careful that you and your custodian do not violate the rules. Find a custodian that abides by the rules as well so that you know your purchases are safe and protected.
If there is one company over anyone else that I would recommend for you to start and get help from, it is without a doubt Augusta Precious Metals as they do things much different from any other company in the industry. You will be treated with respect in a very professional and (most importantly) a non-salesy way by their representatives. They can also help you decide IF a gold IRA is something for you or not, yes you heard that right, they will not try to convince you to get one if it don´t make sense for you and your particular situation. If that is not for you, then you can always simply do a cash purchase of either gold or silver (outside an IRA).
If I was you, I would get in touch with them, you will understand pretty fast what I mean and why they are takinging over the industry and completely dominates it!
However, we are all different and I still always recommend that you compare different alternatives against eachother before you make any final decisions.
So please make sure to look at other alternatives aswell, our Top-5 List of Gold & Silver IRA Companies might be a good place for you to start your research.
I hope you found this short post on Gold IRA Rules and Regulations to be helpful and that you now have a better understanding in the subject. Please share your own experience in the comment section below! Also, if you got any questions about this I would be more than happy to answer them below!
I wish you much success!
Michael, founder of Gold Retired
This was a very informative post, thank you!
Happy to hear you liked it!