Gold IRA Rules and Regulations

There are more than a few gold IRA rules and regulations...

Gold and Precious Metals IRAs are carefully regulated investment instruments. Because they are self-directed and contain tangible assets that must be physically stored somewhere, the IRS imposes strict rules to keep these accounts on a short leash. 

Up until 1997, investors did not have the option of holding precious metals in individual retirement accounts. The Taxpayer Relief Act changed that and permitted investors to hold bars, bullion, and coin in self-directed IRAs.

In this article, we look at the IRS requirements and stipulations that govern Gold and Precious Metals IRAs.

Account Stipulations

IRS Account Custodian Rules

Gold IRAs must be opened and set up through administrators/custodians. Custodians and administrators are entities, not individual people. Custodians include banks, financial institutions, insurance companies, and retirement companies. While these establishments may handle traditional IRAs, not all are approved by the Internal Revenue Service to handle self-directed IRAs such as Gold and Precious Metals IRAs. Investors who wish to open a Precious Metals or Gold IRA must find an IRS-approved custodian or administrator that handles those accounts.

The IRS stipulates that a Gold or Precious Metals IRA account administrator purchases precious metals on behalf of the investor. Investors may not personally buy gold or precious metals for their own IRA accounts. Investors instruct their custodians on the purchases they wish to have made, and the custodian than makes all the purchase arrangements for the physical metals, including shipping and insurance.

Metals Requirements

The IRS only allows certain kinds of metals in a Gold IRA, and the metals must meet precise purity standards.

IRS-Approved Metals 

Gold, Silver, Platinum, and Palladium

Gold, silver, platinum, and palladium are the only metals allowed in a Gold or Precious Metals IRA. Gold and silver must be 99.95% pure. Platinum and palladium must be 99.99% pure. 

Bars

Metal bars must be produced by accredited or certified manufacturers, refiners, or assayers. Accrediting bodies include COMEX, LME, NYMEX, LPPM, NYSE/Liffe, TOCOM, and ISO 9000. 

Small bullion bars must be manufactured to precise weight measures (other than 1000-oz silver bars, 100-oz gold bars, 400-oz gold bars, 50-oz platinum bars, and 100-oz palladium bars).

Approved gold bars include Credit Suisse gold bars, Johnson Matthey gold bars, and the Valcambi gold CombiBar. The latter is cast to easily separate into 50 one-gram small bars.

Popularly held approved silver bars include Royal Canadian Mint silver bars, PAMP Suisse silver bars, 10-oz Sunshine silver bar, A-Mark silver bar, Walking Liberty silver bar, OPM, and RCM silver bars.

Approved platinum bars include Valcambi, Credit Suisse, PAMP Suisse, and Engelhard platinum bars. Approved palladium bars are the Baird and Credit Suisse palladium bars.

Coin

Like metal bars, coins must also be produced by approved (accredited or certified) manufacturers. Non-proof coins must be damage-free and in brilliant uncirculated condition. Proof coins must be in their original packaging, fully encapsulated, in excellent condition, with their certificate of authenticity.

Only specific coins, approved by the IRS, are allowed in Gold or Precious Metals IRAs. These include:

  • American Eagle gold coins
  • Australian Kangaroo gold coins
  • Canadian Maple Leaf gold coins
  • Chinese Panda gold coins
  • Austrian Philharmonic gold coins
  • America the Beautiful silver coins
  • Mexican Libertad silver coins
  • Australian Kookaburra silver coins
  • Austrian Vienna Philharmonic silver coins
  • British Britannia silver coins
  • American Eagle platinum coins
  • Australian Koala platinum coins
  • Isle of Man platinum coins
  • Canadian Maple Leaf platinum coins
  • Canadian Maple Leaf palladium coins

Coins that are not acceptable for inclusion in a Precious Metals IRA include the following: 

  • rare or collectible coins
  • Chilean, Mexican and Colombian Peso
  • Belgian, French, and Swiss Franc
  • Dutch Guilder
  • British Brittania and Sovereign
  • Hungarian Korona and Austrian Corona
  • South African Krugerrand
  • German Mark
  • Italian Lira

IRS Storage Rules                                               

Metals Storage Must Be Managed by IRS-Approved Custodians

Gold and precious metals held in an IRA must be stored by a bank or an “IRS-approved nonbank trustee.” In other words, investors may not physically keep their gold, silver, palladium, or platinum at home if it is part of their IRA. The IRS strictly prohibits the private holding of Gold IRA metals. Investors who keep Gold IRA metals in their personal possession will find that the IRS treats the metals as an unauthorized early distribution. As such, the metals are subject to immediate taxation and penalties for the early distribution.

The IRS requires custodians to purchase metals with an investor’s IRA account funds, receive the metals, and arrange for them to be delivered to an IRS-approved third-party depository. The investor may select a depository of his or her choosing or may go with the depository with whom the custodian already has a working relationship.

Metals Must Be Stored at IRS-Approved Depositories

Third-party depositories offer segregated and non-segregated storage options. Segregated means investors’ metals deposits are stored separately from each other. Three examples of depositories are Delaware Depository, Brinks Salt Lake City, and IDS Texas. Of these, only IDS Texas offers segregated storage.

The IRS keeps a regularly updated list of approved entities that may serve as non-bank trustees or custodians and depositories. The IRS removes entities whose approved status it revokes or withdraws. A revocation may come about due to a change in name, address, or another item that affects the entity’s approval eligibility.

Tax Rules: Contribution Limits and Early Withdrawal Penalties

Gold and Precious Metals IRAs are governed by rules regarding how much investors may contribute annually and the consequences for unauthorized, early withdrawals (distributions).

IRA Tax Rules and Contribution Ceilings

The annual contribution limit to a self-directed IRA is $5,000. This limit increases to $6,000 when an investor turns 50 years old. 

Age-Specific Gold IRA Rules 

Gold IRA funds may not be accessed until investors reach age 59 1/2.  At that point, they may take distributions or continue to contribute to the IRA or leave it untouched. Once they reach age 70, however, investors must begin taking distributions and withdrawals. Gold IRA custodians advise investors on the particulars of these requirements. 

IRA Penalties for Early Withdrawal and Exceptions

Investors may not withdraw funds from their self-directed IRAs before the age of 59 1/2. If they do, the withdrawals are considered by the IRS to be unauthorized early distributions. The penalty is a 10% fee on top of taxes (unless the funds were rolled over from a Roth IRA, where they were already taxed).

There are some exceptions to the penalty fee for an unauthorized early distribution. 

  1. The investor (IRA owner) must withdraw money because he or she has become disabled.
  2. The investor dies and an heir must withdraw the funds from the Gold IRA.
  3. The investor suffers a job loss, cannot pay for insurance, and must withdraw funds.
  4. The investor is sick or injured, hospitalized, and must withdraw funds to pay for medical expenses.
  5. The investor makes equity withdrawals of identical amounts known as “substantially equal periodic payments” over the course of his or her life.
  6. The investor or someone in his or her immediate family needs funds for education. In this scenario, education includes tuition, room and board, books, and other expenses.
  7. The investor plans to use up to $10,000 of withdrawn funds to buy a first home.-

Summing It Up

Many investors set up Gold or Precious Metals IRAs as protections for retirement, since precious metals tend to hold their value and withstand market fluctuations. However, the IRS holds Gold and Precious Metal IRAs to strict standards. Investors must be knowledgeable about Gold IRA rules and regulations.

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