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IRA-approved gold bars and coins are also known as IRA-eligible gold. These are specific pieces of gold that you can include in a self-directed gold or precious metal IRA. The IRS sets particular standards for what can and can't be included in a gold IRA.
In times of economic uncertainty, owning gold can offer your retirement portfolio a level of security. One of gold's historical strong points has been hedging against inflation.
Gold can anchor a portfolio's value against an economic downturn or loss of spending power.
You can buy gold just by itself, but there are many tax benefits to investing in a gold IRA. If you're already familiar with traditional or Roth IRAs, then you might be considering adding a gold IRA to your portfolio.
Knowing the advantages and what kinds of IRA-eligible gold there are will help you understand the ins and outs of this kind of retirement investment option.
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IRS Requirements for IRA-Eligible Gold
A gold IRA is a self-directed individual retirement account. When you partner up with a broker and a custodian, you can buy select precious metal products and invest for the future in an IRA.
This combines the tax advantages of an IRA with the historical benefits of precious metal investing. The IRS has very specific rules about gold IRAs since they govern most federal tax matters.
They require you to use a dedicated broker to create and manage the account. You also have to use a custodial service to store your metals for safekeeping. There are also strict rules about what kinds of gold you can buy for your self-directed IRA.
On the open market, you can privately buy any kind of legal gold as a private consumer. However, gold IRA pieces must fall within rigid standards.
Gold coins are common options to invest in. The minimum acceptable purity is 99.5%. For the most part, collectible coins are normally excluded.
Any proof coins have to be encapsulated. They also need to be in mint condition. A certificate of authenticity is also mandatory.
Non-proof coins are acceptable in limited circumstances. First of all, they must be in brilliant-level condition. Second, they must also be uncirculated.
Bars and rounds are also acceptable IRS-approved and IRA-eligible products.
The minimum acceptable purity level is still 99.5%. In addition to meeting the fineness requirements, they must also be produced via a certified source, accredited source, or national government mint.
Small bullion bars are another category of IRA-eligible products. They, too, must meet particular manufacturing specifications. Their physical weight is usually the dominant determining factor.
The U.S. Mint has two approved coins in particular that are very popular among gold IRA holders. One is the American Gold Buffalo.
The other is the American Eagle gold coin, which is a notable IRS exception to the purity requirements most other coins have to adhere to.
You should know that many coins might actually adhere to IRS purity standards but still wind up being ineligible. That's because they're deemed to be collectibles.
Popular examples of coins meeting the purity standards but not being IRA-eligible include U.S. Liberty coins, French 20 Franc gold coins, and U.K. Sovereign coins.
Do You Have to Check the Requirements Yourself?
Knowing the guidelines for what is IRA-eligible helps you understand what you can and can't put into a self directed gold IRA. However, you don't have to determine for yourself on a coin-by-coin basis.
Any precious metal broker you deal with will have a way of showing you just what is eligible and what isn't. While doing a gold IRA through a broker is one of the requirements, this is one of the times when it's to your benefit.
Most precious metal brokers will handle both gold IRAs and also sell gold pieces to consumers directly. You'll see both on their websites, but you will also be able to narrow down your options.
Many precious metal brokers will have website categories only for IRA-eligible products. Most of them will also let you narrow down what is shown to you by the specific search parameter.
Nearly all will also have some kind of symbol marking products that are available for IRA usage.
One of the many reasons the IRS requires gold IRAs to be handled by brokers is so they can make sure precious metal investments meet the eligibility requirements.
One of the reasons these requirements are in place is to protect investors from buying gold that has been faked or tampered with. Some gold pieces might be altered in such a way that their actual value is not as much as it would initially appear.
Avoiding collectibles is another reason for these requirements. Collectible pieces might have their value based on both the spot value of the precious metal content but also collector demand.
This strays away from pure precious metal investing and the strengths that gold might have as a retirement investment and safe haven against economic turmoil and inflation.
How is Buying IRA-Eligible Gold Different from Other Gold?
If you want to buy gold ineligible for an IRA, then it's not any different than buying anything else in a store or online. You choose what you want to buy from anything that's on the list or available.
You pay the price, plus taxes and any applicable shipping and handling, and then you get to take personal ownership of what you have bought.
IRA eligible gold is different. You are restricted to IRS-approved coins, bars, and bullion. You might not pay taxes on the purchase given the IRA benefits, and your products are shipped straight to the depository instead of you taking possession of them.
One huge potential difference is how you pay for them. Ineligible gold you buy as a private consumer you do so with only after-tax dollars or post-tax income.
With a gold IRA, you might be able to use rollover funds from a previous retirement account to buy your precious metals with pre-tax income.
The general gold IRA process follows a three-step sequence:
The IRS has designated several dozen precious metal brokers to serve as account administrators for gold IRAs. There is also a list of IRS-approved storage vaults and depositories.
Most brokers have a handful of relationships with storage providers on the IRS list.
Vault or depository storage is another requirement of self-directed gold IRAs. You can't take personal ownership of your metals until you do a withdrawal or distribution that pulls the products out of the tax-advantaged shelter.
The security of investment metals is a big reason for this, but helping investors avoid mistakes and fraud is another notable concern.
The first specific difference you might notice between IRA-eligible gold and all gold is the minimum purchase amount.
Most precious metal brokers have minimum investment requirements they enforce to open a gold IRA through them, and that minimum can range from $2,000 up to $50,000.
On the other hand, if you are buying ineligible gold for private ownership, then you can get as much or as little as you want.
Storage is the second primary difference. IRS-approved gold has to be stored in an official depository or vault. The gold you buy privately is something you can keep at home, in a safety deposit box, or in any other location you consider secure.
Shipping fees are the third difference. Most gold IRA brokers will include shipping fees in their account fees. Private transactions might have shipping and handling plus insurance tacked on when you check out.
Fees are the fourth area of difference. A gold IRA will likely have a setup fee to start with, annual maintenance fees for the account administration, and recurring storage fees for the depository's operational costs.
On the other hand, gold you buy as a single transaction won't have any ongoing fees since it simply becomes your personal property.
Evolving and Current Requirements
There was a time that only American Eagle gold and silver coins were eligible for IRS use. However, legislation from 1997 expanded things.
The requirements for gold products were expanded, and silver, platinum, and palladium were added to the list of acceptable options.
U.S. gold coins of 1, 0.5, 0.25, and 0.1 ounces are now permitted. Silver coins that the U.S. Treasury Department mints are allowed in 1-ounce variations. Select foreign coins are also acceptable.
Coins, bars, and rounds must meet the minimum fineness requirements listed above. However, they must also be produced by a manufacturer, assayer, or refiner that meets certain certification or accreditation standards.
Those include ISO 9000, TOCOM, LPPM, LBMA, LME, NYSE/Life, COMEX, and NYMEX.
IRA-eligible gold products include but are not limited to the following:
IRA-eligible silver products include but are not limited to the following:
IRA-eligible silver products include but are not limited to the following:
IRA-eligible platinum products include but are not limited to the following:
In all of the above categories, other products might meet IRS-approved regulations and be eligible for a precious metals IRA.
It's also useful to know specific examples of precious metal products that are not acceptable for a gold IRA:
Why Invest in a Gold IRA Over Private Ownership?
You certainly don't have to create a gold IRA to invest in precious metals, but you'd be missing out on serious tax benefits. A traditional gold IRA is something you can deposit money into with tax-deductible status under annual limits.
A Roth IRA has money grow free of taxes and allows for tax-free withdrawals in retirement.
Those tax benefits do come with limitations, however. Those include contribution limits, fees, minimum investment requirements, and an early withdrawal penalty. You need to consider all of them when deciding.
Contribution limits at the time of writing were split on age. You could invest $6,000 per year if you're under the age of 50. Anyone older could contribute $7,000 per year.
A gold IRA does involve fees, possibly starting with an initial set-up fee. Annual fees for account maintenance and storage usually take place. They might be waived under certain circumstances.
Nearly any gold IRA broker will require a minimum investment level of some sort. These can range from a few thousand to $50,000. Without a previous retirement account balance to do a rollover with, you might have a hard time hitting the minimum threshold.
Gold IRAs exist to help you save for retirement, so the government imposes a 10% tax penalty if you take a withdrawal before age 59 1/2. That's on top of facing normal taxes for pulling out of the tax shelter. Liquidating earlier than retirement might not work for you.
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I started BMOGAM Viewpoints as a way to compile all my views on investing in one place. I own my home, have some real estate, and own a few stocks like most people, but what really drives my interest in investing is I have a strong love of precious metals, especially gold.
