How to Put Gold and Silver into an IRA in 3 Steps
Have a Golden Retirement
We've all heard that precious metals should represent about 10% of a retirement account.
But very few people hold any precious metals in their retirement accounts at all.
And the evidence is in the numbers...
Precious Metals in Retirement Accounts
The Investment Company Institute estimates there are about $24 trillion of U.S. retirement assets in total.
So if 10% of that money was actually allocated to gold specifically, retirement accounts would hold about a third of all the gold ever produced.
Yet they don't — not even close. That's more than twice the total amount of gold held by every central bank in the world.
In terms of silver, 10% of that $24 trillion would buy 95 times more silver than is actually even available!
The Silver Institute estimates identifiable aboveground silver bullion stocks at just over 1.8 billion ounces. 10% of total U.S. retirement assets could purchase nearly 171.5 billion ounces of silver.
But aside from a general lack of interest in precious metals, there's a good reason more precious metals aren't held in retirement accounts such as IRAs.
That's because many types of IRAs don't allow funds to be allocated to physical precious metals like gold and silver.
Gold and Silver in Self-Directed IRAs
To own precious metals in an IRA, a customer must have a “self-directed IRA.”
Most IRA custodians will only allow customers to purchase authorized stocks, bonds, funds, and other approved investments.
But with a self-directed IRA, customers can own much more diverse investments in their retirement portfolios. These can include real estate, mortgages, franchises, partnerships, private placements, tax liens, and precious metals, among other things.
Physical precious metals purchased through a self-directed IRA must be stored in IRS-approved depositories. The four precious metals allowed to be held in a self-directed IRA are gold, silver, platinum, and palladium — provided they are in the form of IRS-approved coins or bars.
The Internal Revenue Code does not allow “collectibles” to be put into an IRA. That would include things like art, antiques, stamps, gems, and gold and silver coins.
However, the IRC does make some exceptions for certain gold and silver bullion that it does not consider “collectibles.” These would include any gold or silver coins and bars produced by a national government mint or NYMEX- or COMEX-approved refinery that meet a minimum requirement of .995 fine gold or .999 fine silver.
(Note: The IRS makes an exception for the American Gold Eagle, which is struck in .9167 fine gold.)
Here are the government-minted gold and silver bullion coins that are acceptable to own in a self-directed IRA:
Notable gold and silver coins that are ineligible to be held in an IRA include:
- American Gold Buffalo proof coins, due to their “collectible” nature¹
- British Gold Britannias and South African Krugerrands, because they do not meet the minimum standard of fineness (Note: British Silver Britannias are allowed)
- Numismatic coins including pre-1933 gold coins, due to their fineness standards and “collectible” nature
¹ So-called “uncirculated” or “business-struck” American Gold Buffalo coins are allowed to be in a self-directed IRA. However, the Gold Buffalo proof coins are not.
So now that you've got the basics, here's exactly how to get the ball rolling...
How to Put Gold and Silver into a Self-Directed IRA
As previously mentioned, the IRS requires IRA precious metal to be held in a custodian account. These custodians are banks, trust companies, credit unions, brokerage firms, and savings and loan associations approved by the IRS to provide asset-custody services.
To put gold or silver into an IRA, opening a custodian account is your first step.
Step #1: Open a Self-Directed IRA with a Custodian
There are thousands of companies that all want your business, so choosing one is tricky. But here are some things you should be on the lookout for:
Costs — Nothing is free. Precious metal custodians have fees for opening an account, closing an account, maintenance fees, storage fees, wire fees, overnight fees... the list goes on. So make sure to compare the costs associated with different custodial firms.
Hidden Costs — Oh, yeah. There are lots. And things like inactivity fees can add up. Make sure to learn about every fee associated with opening an account, including maintenance fees or penalties your account can possibly incur.
Reputation — It's too perfect of a quote in this context not to reference: “A good name is more desirable than great riches; to be esteemed is better than silver or gold.” — Proverbs 22:1. Check online reviews, the Better Business Bureau, and/or the Business Consumer Alliance to look for a firm with a solid and trustworthy track record.
Qualifications — This one might seem like a no-brainer. But you should only deal with licensed, registered, insured, and bonded custodial firms. And since you're really placing a lot of trust in this firm to hold precious metals for you, I would say it's more than appropriate to ask for verification of those licenses and other information.
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Step #2 Funding the Account
After opening a custodial account, the next step is to add funds to the account. You can add cash to the new account or transfer or roll over an existing IRA or former employer 401(k).
Obviously, adding cash using a check or wire transfer from your bank is a fast way to fund the account. Transferring or rolling over an existing IRA, however, is going to take a little longer.
Step #3 Purchasing Precious Metals
Once the account has been funded, precious metals can be purchased through a bullion dealer and delivered to the custodian.
Custodians do not select bullion dealers for their IRA clients. Ultimately, this is the investor’s responsibility. However, custodians generally have working relationships with several bullion dealers and frequently make recommendations.
And that's basically all there is to it.
The entire process is fairly simple. The two biggest things investors especially need to look out for in setting up a self-directed IRA to purchase precious metals are the costs associated with the custodian and its reputation.
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