If you’re interested in gold IRAs to protect the value of your assets, buying any collectible coin that catches your eye is not a good idea. The types of investment metals which can be used in an gold IRA accounts are actually governed by strict rules laid down by the Internal Revenue Service. We have an extensive 401k to gold IRA rollover guide available. There are several popular types of bullion coins and bars that fail for meet the purity requirements set forth by the IRS.
IRS Account Rules
If you want to open a gold IRA account, you will first need to open an account with one of the IRS approved administrators. Retirement companies (such as GoldCo, Regal Assets, Advantage Gold), banks, insurance companies can all be administrators. But not all of these administrators won’t be able to handle a gold backed IRA. The ones that do, might require you to open a new account, so it can be a self-directed IRA.
It is very important that the precious metals you buy with your IRA account are not done personally. The IRS rules require that the administrator does the actual transfer of your funds. The purchase is done by your custodian. Shipping and insurance is usually done after they complete the purchase.
IRS Storage Regulations
After the transaction is done and precious metals have been purchase, IRS has a set of guidelines for storage. You are never allowed to have possession of your metals, not even for a single day. This is why your custodian in a self directed IRA is crucial. Furthermore, you are not allowed to purchase any precious metals with the intention to transfer it to your custodian or administrator. If your metals are treated as distributed – the IRS will start assessing penalties and taxes.
The custodian will receive your precious metals and hand them to a IRS approved 3rd party off-site depository. The depository can either be one you select or simply let your account administrator handle it. Usually they already have existing partnerships established. Your metals will be safe up to the point when you want to sell your gold or take physical ownership. In this case, distributions would be securely delivered to your home address.
Approved depositories are setup to hold your metals and usually specialize only in self directed IRAs. The precious metals stored will not leave the vault until you sell or request a distribution. Yearly storage fees depend on whether you choose segregated or aggregated. Segregated storage of your holding might incur a higher fee, but your holdings are kept in a individual safe deposit box.
Contribution Limits and Tax Regulations
You should always check what the yearly maximum amount for contributions is with your account administrator. Is has been $5,000 and increases to $6,000 per year once you turn 50. You can either choose to rollover your funds from a qualified account or send a check straight to the administrator. In neither case you are not allowed to purchase any metals yourself.
Tax consequences apply if you want to take gold out of your account via a distribution. Full income tax applies to the precious metals value at the time you withdrew. On top of that, a 10% “early withdrawal” tax penalty will be assessed on the value of your metals. Furthermore, if you realized any profits from your original cost basis, a 28% capital gains tax will be assessed.
Retirement Age Limit
The legal age limit when you are able to access your Gold IRA fund is 59½. While you don’t have to start taking distributions at this age, once you reach 70 you must begin to start withdrawals and distributions.
Exceptions on Early Withdrawal Penalties
There are a number of early withdrawal penalties exceptions that the IRS allows. You don’t have to pay the 10% penalty if the following conditions are met:
- IRA owner becomes unemployed and the result is, he can’t pay for insurance
- IRA owner dies and the beneficiary needs to access the access the account for withdrawal
- The account owner becomes disabled
- The owner or direct family members (spouse or children) needs funds to pay for education. This also includes accommodation, books and reasonably related expenses.
- IRA owner becomes becomes hospitalized and has no insurance, money for medical bills.
- IRA owner wants to buy a first time home
The purity requirements broken down by metal and purity:
- Gold: 0.995 +
- Silver: 0.999 +
- Platinum: 0.9995 +
- Palladium: 0.9995 +
To make your investment easy, you can find a complete list of coins and bars which meet the IRS’s purity requirements below. Please note that this list was assembled in 2014, you should verify the suitability of any purchase before making a precious metals investment.
IRS Approved Precious Metals
- US Gold Eagle Coins
- US Gold Buffalo Coins (Non-Proof)
- Austrian Gold Philharmonic Coins
- Canadian Gold Maple Leaf Coins
- Australian Gold Kangaroo / Nugget Coins
- Credit Suisse Gold Bars
- Valcambi Gold CombiBars
- Johnson Matthey Gold Bars
- US Silver Eagle Coins
- Australian Kookaburra Silver Coins
- Canadian Silver Maple Leaf Coins
- Mexican Silver Libertad Coins
- Austrian Philharmonic Silver Coins
- Royal Canadian Mint Silver Bar
- Johnson Matthey Silver Bar
- US Eagle Platinum Bullion Coins
- Canadian Maple Leaf Platinum Coins
- Australian Koala Platinum Coins
- Isle Of Man Noble Coins
Palladium Coins & Bars
- Canadian Palladium Maple Leaf Coins
- Russian Ballerina Palladium Coins
- Credit Suisse Palladium Bars
- Baird Palladium Bars
Collectable coins And IRAs
One VERY important fact you should take note of is that collectable coins are NOT allowed in a IRA account. Many dealers will try to conceal or contradict this fact to make sales, but the prohibition is very clear. There is nothing wrong with purchasing and holding collectibles as a separate form of investment, but because of their variable purity levels they cannot be included in an gold IRA.
The drawback of purchasing unapproved coins is that you will need to pay taxes on them. If you withdraw retirement savings to make such a purchase and you are under the age of 59.5, you’ll also have to pay a 10 percent penalty.
Prohibited Bullion In IRA Investing
Below you’ll find a list of very popular precious metals – in both coin and bar form – that do not meet the purity requirements for use as an gold IRA investment. You can use this list as a handy touchstone for judging the competence of gold IRA advisors; any “expert” who recommends buying metals from the list below is clearly lacking in true expertise.
|Prohibited Bullion In IRA Investing|
|Chinese Panda Coins|
|French Napoleon Coins|
|South African Krugerrand Coins|
|Israel Tower of David Coins|
|Switzerland Vreneli Coins|
|USSR Chevronet Coins|
|UK Sovereign Coins|
|Somali Elephant Coins|
|Austrian Corona Coins|
|US Buffalo Proof Coins|
|UK Britannia Coins|
|Russian George The Victorious Coins|
|Mexican Gold Peso Coins|
|Dutch 10 Guilder Coins|
|Chilean 100 Peso Coins|
|Italian Lira Coins|
|Mexican 50 Peso Coins|
|US Liberty Coins|
|Swiss 20 Franc Coins|
If you’d like to use a particular coin or bar to invest in precious metals for your IRA, verify its suitability before making any commitments. If you need the assistance of a reputable IRA company, you can check out our list of reviews and ratings here.