If you’re an IRA contributor, you might not realize that you can invest in physical gold as part of your IRA.
Maybe you have invested in gold for your nest egg and have asked the question: Can I take physical possession of gold in my IRA?
IRA contributors that possess gold as part of their IRA can withdraw their physical gold, but to minimize tax and penalties, they must follow a specific procedure.
The following instruction and advice map out how to take possession of their gold while minimizing any exposure in terms of taxes or penalties.
How to Hold Physical Gold in an IRA
The first step is to find an IRA that allows you to hold physical gold and other precious metals, including silver, platinum, and palladium.
These work exactly like regular IRAs and will enable you to contribute up to $6,000 annually for those under 50. For those contributors ages 50 or older, the maximum annual contribution is $7,000.
The easiest way to add gold to your IRA is through a broker that deals with gold IRAs. A broker will know the rules that apply to gold ownership in an IRA, including how to attain physical possession of the gold if you choose to do so.
After that, you purchase gold in coins or bars for the IRA account set up for you. Your gold must comply with IRS rules.
Gold IRA Possession Rules
There are minimal standards for any gold you want to hold in your IRA.
Depending on the metal you want to add, there are specific guidelines. The gold must meet minimum fineness requirements as per the Millesimal Fineness System.
Other criteria include:
The gold must be manufactured by:
- NYMEX or COMEX-approved refiner or assayer
- Government mint
The gold must also be ISO9001 Certified. Finally, a gold IRA will accept bullion bars. Still, they must meet the criteria above (Minimum fineness, manufactured by an NYMEX or COMEX approved refiner or assayer) and be ISO9001 Certified.
IRS rules
The IRA prohibits holding your gold if it is part of an IRA. You can own your gold and store it where you choose if the gold is not part of an IRA. Your IRA gold, per the IRS, must be “in the physical possession of a trustee.”
Collectibles for a gold IRA are described as “gold and other bullion.” The reason is that the IRS does not allow you to hold “collectibles” in your IRA unless your holdings have met the criteria for highly refined bullion.
The investment must also be in the possession of a bank or IRS-approved trustee. In essence, if the IRS has not approved the quality of your gold, it is not eligible for an IRA holding.
Explaining the logic behind the IRS requirements, the Industry Council for Tangible Assets has published a white paper entitled “The Prohibition on Home Storage of Bullion Held in an IRA.”
IRS penalties for non-compliance
Non-compliance with these IRA rules for a gold IRA account can result in taxes, penalties, and fees should include the IRS focus on the storage methods of your gold IRA.
Taxes and penalties
All the standard tax rules apply to a gold IRA if you keep the gold in the IRA. Meeting those rules means that your investment total in the IRA is free from all capital gains taxes.
Withdrawing a distribution before you turn 59.5 years of age will subject you to a 10 percent penalty.
How to Physically Possess Your Gold
The gold in your gold IRA can be converted into your possession simply. You have two options: Work through a custodian holding account or receive a cash distribution for the equivalent value of the gold you hold in your gold IRA.
Through a custodial account
The process for getting physical possession of your gold is as follows:
- Contact your portfolio manager and request an IRA distribution.
- Fill out the required forms for an IRA distribution request for your custodian (your broker can help you fill this form out.)
- Your broker will submit the document with your authorization and signature to your custodian.
- Once approved, your gold gets transferred. This process usually takes 7 to 10 days to complete.
Getting a cash distribution
You also can get a cash distribution for the equivalent value of your gold in your gold IRA. That process is usually three-fold.
- First, you request your broker to liquidate all or a portion of your gold holdings.
- You then accept the buy-back offer by your broker (which will usually be based on the current market rate.)
- Finally, you complete the required forms for your custodian and receive your payment.
Your broker is under no legal obligation to make you a buy-back offer, so you should look for a broker with a history of doing so. Legally, brokers cannot make a guarantee of offering buy-backs, so finding one that cites their history of doing so is essential.
Summary
Gold is an excellent hedge against volatile economic times. You can own your gold in an IRA with a gold IRA. According to the IRS, you cannot physically hold your IRA gold at home and must go through a broker or custodian.
