What does IRA eligible gold mean? What are the rules surrounding the ownership of gold in an IRA that I should be aware of? Thank you for taking the time to expand the scope of your knowledge in this interesting subject. Join me in this detailed post, in which I will lay out the information that you need to distinguish IRA eligible gold from regular gold. Let’s get right into it.
Physical gold has been established to be an important element of a well-diversified retirement investment portfolio. There are, however, some rules that one needs to follow if they are to take advantage of the benefits such gold can offer. Thing is, IRA eligible gold can’t be added to any type of retirement account. It must be incorporated into a unique IRA known as a self-directed IRA, which happens to be one of the very few retirement plans that do not limit investors to traditional paper assets.
By opening a self-directed IRA, you are presented with an opportunity to invest in a wide range of assets, including gold and other precious metals such as silver, platinum, and palladium. What, however, makes the gold put into such an account IRA eligible? Let’s take a look at that.
Only specified gold coins, bars, and rounds are approved by the IRS
You may be quite enthusiastic about purchasing and including your favorite gold coins in your self-directed IRA, but that won’t quite cut it. Say, for instance, you have been eyeing the South African Gold Krugerrand Coin as a coin you’d love to purchase now and sell later. This coin has a fineness of 0.9167, which is, unfortunately, below the set standards of fineness as defined by the IRS.
According to the Internal Revenue Code, IRA-eligible gold coins, bars, and rounds, all need to have a minimum fineness of 0.995 and must be produced by a national government mint, or any other accredited and internationally recognized refiner. The only coin that is exempted from this requirement is the Gold American Eagle Bullion Coin, which has a fineness of 0.9167.
There are other options available for you to choose from, including:
- American Eagle Proof Coins
- 1 oz. American Eagle Bullion Coins
- 1 0z. American Buffalo Coins
- Australian Kangaroo Coins
- 1 oz. Pearl Harbor Coins
- Austrian Philharmonic Coins
- Canadian Maple Leaf Coins
- Australian Kangaroo Coins
- Perth Mint Bars
If someone sells you the above coins and tells you that they have been graded by certification institutions such as Professional Coin Grading Service, then you should be aware that you can only use them as collectibles, and not for the purposes of investment through a gold IRA.
You cannot add pre-owned gold to your Self-Directed IRA
If you already own some gold coins, either through inheritance or past purchase, then you may be already thinking about how you will put all of them into your self-directed IRA. This isn’t the case, however. You are not allowed to add pre-owned gold to your self-directed IRA, even if it meets the other requirements stipulated in the Internal Revenue Code.
The IRS requires that you use the cash in your IRA, to purchase the gold coins or bars through your custodian. If you own a Roth IRA, Traditional IRA, or any other eligible retirement plan such as a 401(k), you can have the funds in either account transferred from your current custodian to the custodian of the self-directed IRA you will open (which will then be referred to as a Gold IRA). You can also opt to do an indirect rollover or simply deposit the funds from your other money accounts into the newly-created gold IRA.
Once you have enough funds in your IRA, your custodian will buy the gold on your behalf and make arrangements on how it will be delivered to your preferred third-party depository, for the purposes of storage. Note that you have complete control over your gold assets that the custodian purchases on your behalf, as well access to your depository, provided that they are both approved by the IRS.
The gold must be stored in an IRS-approved depository
Before you think of how you will be showing off your gold coins and bars purchased through a gold IRA at your home, let me stop you right there and tell you that that’s impossible.
The IRS does not allow you to keep IRA-eligible gold in the safe at your home or any type of security deposit box. All gold must be stored in a special IRS-approved depository.
If you store the gold at home, then the IRS will view that as a distribution, which then translates to the loss of all the underlying tax benefits. You could also get hit with a 10% early withdrawal penalty if you are under 59 ½ years old.
N.B: If the IRS establishes that the day your gold coins or bars made it to your home was the date of “ distribution”, you may end up getting slapped with additional penalties as well as back taxes owed from the time of distribution.
This is why the IRS strongly warns against anyone who is trying to sell precious metals while promoting the notion that the same items can be held in one’s home or local deposit box.
Frequently Asked Questions on “ What is IRA eligible Gold?”
1. Can I walk away with my IRA eligible gold at the end of my IRA term?
Yes, you can. Upon hitting 59 ½ years, you are allowed to liquidate your precious metal assets in the gold IRA for cash. You can, however, choose to take physical possession of your gold coins and bars without getting hit with penalties.
Unlike the case of withdrawing funds from other retirement plans such as traditional IRA, gold IRAs allow investors to walk away with this very powerful asset, which they can opt to hold on to, sell in the future, or pass down to their family members.
2. What are some top examples of precious metals that are ineligible for use in a gold IRA?
The IRS does not allow investors to hold any of the following products, in the name of investing in a precious metal IRA:
- Collectible coins
- Rare coins, Numismatics
- Coins that are graded and certified by third-party grading institutions
- Coins such as Austrian Corona. Italian Lira, Hungarian 100 Korona, Chilean Peso, U.S. Buffalo Proof, British Britannia minted before 2013, French Franc, Dutch 10 Guilder, Belgian 20 Franc, U.S. Liberty, Mexican 50 peso, South African Krugerrand, Swiss 20 Franc.
3. Can I open a Gold IRA if I already have another retirement plan?
Yes. If you’re already saving for your retirement years in a plan such as a 401(k), you can still open a gold IRA and begin adding IRA eligible gold, in a bid to lock in the potential benefits of physical precious metals. You, however, have to remember that the IRA contribution limits apply to all your retirement plans combined, hence the need to strategize on how you will split the funds between your other retirement plan and your gold IRA.
4. For how long will my IRA eligible gold be stored in a depository?
The IRS requires that gold and any other precious metals in the custody of an approved custodian be held at a depository storage facility until it is time to withdraw the funds on reaching the set retirement age. Placing the precious metals in an IRS-approved depository ensures that they are safe.
The thing about such depositories is that they have an added layer of security. Any time the depository receives precious metals, it inspects them, audits them, confirms that they are of the right weight and quantity, and then holds them securely in the facility. This should give you the much-deserved peace to know that you did not place fake gold coins in your account.
That will be all for this post in which we have addressed the question, “What does IRA eligible gold mean?” My hope is that you now have the answers you needed and that you can now proceed to make a move based on what you have learned here today. Let me know if you have any questions or concerns, by dropping me a comment in the comments section below.
I wish you well,
Eric, Investor and Team Member at Gold Retired!