Are You Allowed to Keep IRA Gold at Home?

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Gold has a justly earned reputation as the perennial inflation hedge, consistently maintaining and even increasing its value across centuries of economic and financial chaos.

It’s not difficult to see why prudent investors tend to turn to it, particularly in uncertain times. While currencies and other paper assets rise and fall in value, sometimes quite quickly and spectacularly, gold remains as stable as a rock. 

Similarly, the appeal of the IRA, or Individual Retirement Account, is also not difficult to understand, as it’s an excellent means of making financial provisions for one’s retirement.

And a self-directed IRA is all the more appealing for the greater autonomy that it affords the investor and the greater range of investments that fall under its purview.

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How Should You Keep Your IRA Gold?

It’s only natural that conscientious investors would want to take control of their financial futures and protect their wealth by combining both of these things and creating their own gold IRAs.

But as anyone who has any significant knowledge of precious metals markets knows, not all gold is created equal.

gold coins protected by a lock

There is so-called “paper gold” — which is held indirectly and by contract, and is therefore subject to its own peculiar set of risks — and then, there is the physical metal itself.

While the latter carries unshakable security and lets you know that what you own truly sits in your hands, the question of where and how to store your physical gold — particularly if you own a significant amount of it — can become a vexing one. 

Plenty of storage options are available, of course, and the IRS is entirely willing to extend the traditional tax benefits to your gold IRA if you should choose to warehouse your gold with a licensed and accredited IRA custodian.

But what about those who subscribe to the philosophy of, “If you want something done right, do it yourself”?

Can investors who insist on maximal security — or who just don’t want to pay storage fees — and instead choose to store their IRA gold at home expect tax-deferral and other benefits from the IRS?

In what follows, we’ll discuss all of the ins and outs of home gold storage and how it relates to your IRA. Armed with this information, you can decide whether this option is appropriate for you.

The Basic Legal Background of Gold IRAs and Home Storage

Will the IRS allow you to store your IRA gold at home? As it happens, the answer to this question is not a straightforward one. It is subject to all sorts of exceptions and qualifications.

Before we can answer the question and set you on your way, therefore, we have to delve into the legal background. 

Everything that relates to the current use and establishment of self-directed IRAs dates back to the Taxpayer Relief Act of 1997, which essentially made Gold IRAs into permissible investment vehicles.

The law significantly broadened the kinds of things investors could invest in through an IRA. Gold was but one of these things.

Specifically, IRS Publication 590 stated that thanks to the passage of the act, “Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department.

Beginning in 1998, an IRA can invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.” 

This is only the beginning of the story, however. For further information, we must turn to Section 408(a) of the Internal Revenue Code. This section specifies and defines precisely what an IRA is for legal purposes.

The code defines an “Individual Retirement Account” as “a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries,” but further requires that the trust have certain characteristics.

All of the details of Section 408(a) need not concern us here.

The portion that is specifically relevant to the issue of whether or not one may store one’s IRA gold at home states that the trustee of the IRA — that is, the person or entity who organizes and controls it — must be either a bank or a “person who demonstrates to the satisfaction of the Secretary [of the Treasury or his delegate] that how such other person will administer the trust will be consistent with the requirements of this section." 

We will talk about the exact implications of this statement for home storage of IRA gold in more detail below, but suffice it to say for now that, thanks to a clever reading and re-interpretation of the word “trustee,” it follows the Internal Revenue Code does technically permit individual investors to store the gold held in their IRAs at home. 

Investors must meet some extremely stringent requirements before being allowed to do this, however.

Gold IRA Home Storage Requirements

According to the IRS, to be allowed to store their IRA gold at home, investors must:

  • Create a limited liability company in their name and provide it with a specially written operating agreement
  • Undergo incorporation and submit to an IRS audit of the company
  • Demonstrate that they have a net worth of at least $250,000
  • Require all owners and trustees of the LLC to put up corporate insurance in the form of a $250,000 fidelity bond
  • Divide ownership of the LLC among several people
  • Demonstrate that they have a “reputable financial background” and experience in administering retirement accounts
  • Provide the LLC with a physical location that is open to the public
  • Keep legal counsel for the LLC on retainer
  • Allow a Certified Public Accountant to conduct an audit of the LLC annually

Let us further explain what these requirements mean and how they relate to the relevant portions of Internal Revenue Code Section 408(a). 

The limited liability company is meant to be the trust that oversees your Gold IRA. If you do not feel comfortable placing your gold IRA under the administration of another firm, you must create your own company to fulfill the trustee requirement.

If the LLC is in your name, this would make you the effective trustee. This is how the term “trustee” has been reinterpreted to make home storage of IRA gold legally permissible. 

Of course, the LLC cannot just be any old LLC at all. It must be structured like a legitimate company. This explains why the LLC is required to have its lawyers and accountants and to post its corporate insurance.

It also explains why the company must have some significant assets on its books, and why you, by extension, are required to have a fairly significant net worth.

It further explains why ownership of the company must rest in the hands of more than one person, why the company must submit to audits, and why the company is required to have a physical address.

The existence of a physical address specifically makes it easier for IRS agents to come by at later times and conduct additional audits.

Lastly, it explains why you, if you wish to store your IRA gold at home, must have experience in administering retirement funds. All of this is to avoid the appearance of “shell companies.”

Penalties For Non-Compliance

As you can see, these are quite demanding requirements, and the vast majority of ordinary investors will not be able to meet them.

Moreover, if you attempt to set up a home storage gold IRA of the sort described and fail in any way to meet any of the requirements imposed upon you, the penalties can be quite severe. 

The chief advantage of an IRA is that it has tax-deferred status. This means that you will not have to pay taxes on any of the investments made in the IRA until you decide to withdraw funds from the account.

In addition to that, the periodic contributions that you make to your account — perhaps in the form of a portion of your income specifically devoted to making further investments — will also entitle you to some further annual tax deductions. 

If your home storage gold IRA is found to be out of compliance with any of the above IRS requirements, all of these advantages will instantly vanish.

You will immediately be required to pay taxes on all gains achieved by all of your investments since the account was opened. This includes all applicable federal, state, and local taxes at whatever rates are specified by law.

Once found to be out of compliance, the account is treated as a distribution, which, for legal purposes, is equivalent to shutting down your account and withdrawing all funds. All withdrawn funds are taxed as normal investments of the same type would be.

Furthermore, if you are below 59 1/2 years of age at the time that your home storage gold IRA is found to be out of compliance, you will be required to pay an additional 10% early withdrawal penalty on top of all other taxes. 

Altogether, this means that a significant portion of your investment can instantly evaporate. If you decide to set up a home storage gold IRA, therefore, you must be very careful to comply with absolutely all requirements. 

To make matters even more difficult, it is simply a fact that if you do elect to store your IRA gold at home rather than through an accredited storage company, you will be more likely to be audited by the IRS.

While the IRS does technically allow people to store their IRA gold for the reasons already given, it strongly discourages them from doing so. 

As it stands, the ability to create a home storage gold IRA is the result of a legal technicality but was never explicitly written into the law.

If the IRS had intended to encourage people to store their IRA gold at home, it would have written the relevant tax law very differently.

Setting Up a Gold IRA at Your Home

If you decide that the security of controlling your gold and administering your own gold IRA is important enough to make all of the difficulties of home storage worthwhile, you should know that there are firms that can establish an LLC for you in exchange for a fee.

When they do this, these firms will appoint you as a non-compensated manager of the LLC, thus establishing your control over it. You will then need to go to a bank and open up a checking account for the LLC. 

Then, you must open up your self-directed gold IRA and fund it via your LLC’s checking account. That checking account will serve as a de facto investing platform for your IRA.

If you wish to invest in a new asset, simply write a check from the account and purchase that asset.

If the asset in question is gold, you can buy whatever quantity of gold you desire from your preferred retailer and have it shipped to your home or wherever else you may desire to store it.

So… Should You Do it?

Home storage gold IRAs are not for everyone. Though their advantages are obvious, especially for those who value the independence they provide, the burdens associated with them are considerable. 

We emphasize again: Though the IRS technically allows you to store your IRA gold at home, it heavily discourages you from doing so.

If you don’t have some significant assets already at your disposal, and if you don’t have cost-effective means of meeting all of the other legal requirements associated with storing your IRA gold at home, this option will almost certainly be beyond your reach. 

If you can afford it, a home storage gold IRA can be a way to go, although it's a highly risky one.  

We do not recommend investors attempt storing their IRA gold at home, it is way too risky.

Saving for retirement is all about reducing risk, not dramatically increasing your portfolio to risk.

For smart investors that want to protect their saving with physical gold there are plenty of alternative options are available for investors who want to open gold IRAs.

If you decide that home storage is not for you, there are plenty of reputable depositories that can help you out.

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