With the stock market continuing to make new highs, it might be a good time to take a bit of IRA money off the table and put it in something else. Of course, gold and other precious metals are always on the short list, and are popular choices among owners of self-directed IRAs. Gold, especially, has a proven track record of being a relatively stable store of value and an important ballast for Gold IRA portfolios in times of crisis and uncertainty that goes back thousands of years.
For larger portfolios, we believe that gold and precious metals have a place in anyone’s asset allocation. But before you start making purchases in your own IRA account, there are certain things every Gold IRA owner should be aware of.
- You can’t buy gold or any other precious metal or retirement asset whatsoever from your spouse, your children or grandchildren, your parents or grandparents, or those of your spouse. You also can’t buy gold for your Gold IRA from any entities any of these people control. If you do, you’ll run afoul of prohibited transaction rules that apply to all self-directed retirement accounts, and potentially cause yourself to incur fines, penalties and a big income tax liability.
- You can’t buy jewelry or gems, regardless of the quality of the gold in them. Direct ownership of jewelry and gemstones are both on the list of prohibited investments for IRAs and other retirement accounts – along with alcoholic beverages, life insurance and collectibles.
- You can’t maintain physical possession of the gold. There are TV ads pushing ownership of gold coins that show a woman fondling gold coins on her dining room table. This is fine outside of retirement accounts. But if you want to own gold within your IRA, you can’t be storing it in your own home. If the IRS finds out, they’ll deem any gold you have in your possession to have been distributed, with all the taxes and penalties that would normally occur. You’ll lose the tax benefit of holding your gold within the IRA.
- You can’t just buy any coins or bullion. Any gold you hold in your IRA – or any other self-directed retirement account for that matter, – must be in coin or bullion form, and must be from a mint that is known to mint coins or process bullion of sufficient purity and consistency. Not every type of coin or bullion qualifies. For example, the South African Krugerrand, while a well-known coin among numismatics enthusiasts and gold coin collectors and investors, is not suitable for your Gold IRA.
Here are some coins on the approved list:
- American Eagles
- Australian Kangaroo/nugget coins
- Australian philharmonic coins
- Canadian Maple Leafs
- Chinese Gold Pandas
- Proof American Eagles
- American Buffalo Bullion Gold Coins
- Credit Suisse/PAMP Suisse Gold Bars.
Some coins we know to be ineligible for IRA purposes include:
- Austrian Coronas
- S. Buffalo Proofs
- British Britannia Coins
- Belgian 20 Franc coins
- Chilean 100 Peso coins
- Dutch 10 Guilder
- French 20 Franc coins
- Hungarian 100 Koronas
- S. Liberty Coins
- South African Krugerrands
- Other collectible or rare coins in general, other than those on the approved list.
This isn’t a knock on these coins. They may be fine investments for non-retirement accounts. And, of course, you can direct your IRA to invest in indirect gold ownership via gold and precious metals mutual funds, closed end funds or ETFs, via gold mining stocks, pooled accounts or futures contracts. But if you want to take a direct interest in gold, you have to hold it in one of the approved bullion or coin forms, and you must have a custodian hold it on your behalf.