Gold works in a Self-Directed IRA. So does silver. Precious metals, in fact, are perfectly valid retirement investment assets. So why aren’t gold earrings? Silver necklaces? It’s a common question if you’re thinking about Self-Directed IRAs, but it’s not the only common question. To that end, we’ve put together a list of frequently asked questions—including the jewelry question—so you can better understand how to manage a Self-Directed IRA of your own. Here’s what you’ll need to know.

1. Can Jewelry Be Held in a Self-Directed IRA?

No, jewelry can’t be held in a Self-Directed IRA. While gold and silver are permitted, they have to be in the form of certain coins or bullion that meet IRS standards for purity. For example, gold must be at least 99.5% pure, and silver must be 99.9% pure. These precious metals must also be held in an IRS-approved depository rather than in your possession.

Jewelry, on the other hand, doesn’t meet these requirements. That’s true even if it’s made from high-purity metals. The IRS sees jewelry as a “collectible,” which is not allowed in any IRA. The same goes for other items classified as collectibles, like artwork or antiques. For investors looking to add precious metals to their portfolio, our recommendation is simple. Stick with approved coins and bullion to ensure compliance and avoid penalties.

2. What Other Precious Metals Are Allowed in a Self-Directed IRA?

Aside from gold and silver, a Self-Directed IRA can hold platinum and palladium if they meet specific purity standards (99.95% for both). These metals, like gold and silver, must be held in approved forms, such as coins or bars. And they have to be stored in an IRS-approved depository.

Investors interested in diversifying with precious metals should research the types of coins or bullion that meet IRS criteria. Options like the American Gold Eagle coin, for instance, are popular. They qualify under the IRS’s purity guidelines. However, if you’re still in doubt, consult with your Self-Directed IRA custodian to verify that any purchase complies with the regulations.

3. Can I Use a Self-Directed IRA to Buy Real Estate?

Yes, you can use a Self-Directed IRA to invest in real estate, but it comes with unique rules. First, the property must be strictly for investment purposes. You can’t live in, use, or otherwise personally benefit from the property. This includes family members and other “disqualified persons,” as defined by the IRS, who are prohibited from using the IRA-owned property.

All expenses related to the property (i.e. maintenance, repairs, property taxes) must be paid with funds from the Self-Directed IRA. Similarly, any income generated by the property like rental income must go directly into the IRA account. These rules help maintain the tax-advantaged status of the account. They’ll ensure that personal use doesn’t interfere with the retirement-focused nature of your investment.

4. What Are the Tax Benefits of Using a Self-Directed IRA?

Self-Directed IRAs offer two main tax advantages, depending on whether you choose a traditional or Roth IRA structure. With a traditional Self-Directed IRA, your contributions are tax-deductible, and investment growth is tax deferred. You won’t pay taxes on gains until you take withdrawals in retirement, allowing your investments to compound without annual tax interruptions.

A Roth Self-Directed IRA, on the other hand, doesn’t provide this immediate tax deduction. But qualified withdrawals in retirement are tax-free. This can be especially helpful if you anticipate a higher tax rate in retirement or plan on making significant gains with alternative investments. The Roth allows you to shield those gains from taxes entirely, if you do it right.

Want to know more than the answers to these questions? Reach out to us here at American IRA by dialing 866-7500-IRA today.