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If you're looking at setting up a Gold IRA, you may have a few questions. Gold IRAs offer an excellent opportunity to add precious metals to your retirement account, but if you're not familiar with them, they may seem a bit confusing or even overwhelming.
One question that a lot of individuals have when they're first looking at opening up a Gold IRA, or Precious Metals IRA, is whether they can hold the physical coins and bars that they add to their account in their home. Perhaps you'd feel safer holding your metals in your own home where you can easily monitor them yourself, or maybe you're looking to avoid paying storage fees. Regardless of your reasoning, or even just curiosity, for wanting to keep the precious metals in your possession, it is important to understand exactly what a Gold IRA is and whether taking possession of your metals is permissible.
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What is a Gold IRA?
A Gold IRA is a type of Self-Directed IRA. The Employee Retirement Security Act (ERISA) legislation that was passed in 1974 made it possible for individuals to open IRAs (individual retirement accounts). While Self-Directed IRAs were an option back in the 1970s, there were restrictions on the type of investments that could be added to diversify an IRA.
Specifically, precious metals were prohibited from being held in an IRA. However, in 1997 when the Taxpayer Relief Act was passed, Congress made it permissible to hold precious metals, such as gold, silver, platinum, and palladium in an IRA.
However, there are some limitations on the purity levels for these precious metals in order for them to be held in an IRA. Gold bullion coins and bars must be at least 99.5% pure (with the exception of the American Eagle Gold coin), silver bullion coins and bars must be at least 99.9% pure, and platinum and palladium coins and bars must be at least 99.95% pure.
Can You Take Physical Possession of the Precious Metals Held in Your IRA?
So, can you take physical possession of the gold, silver, platinum, or palladium coins or bars you add to a Gold IRA? No, with very few exceptions, individuals are not allowed to hold the metals in their IRA before they reach the age of retirement and are able to begin taking disbursements.
There are a few exceptions to this rule, but very few individuals qualify to take possession of their precious metals. There are also consequences for holding precious metals for an IRA without meeting the requirements set forth by the IRS. Let's start by taking a look at the requirements the IRS has in place to keep the physical metals from an IRA in your possession. Then, we'll look at the penalties and fees you could be charged for violating IRS regulations.
What Are the Requirements to Qualify to Hold Your Precious Metals for an IRA at Home?
As we mentioned above, while most individuals are not permitted to take possession of the physical precious metals for an IRA, there are a few exceptions.
In order to qualify for home storage for your IRA, you must meet all of the requirements listed below:
As you can see, most individuals will not qualify for all, or even most, of these requirements. Unless you can confidently check each requirement and have verifiable proof that you indeed meet each of these necessities, it will not be permissible for you to hold the physical precious metals for your IRA in your possession.
Even if you do meet all the requirements outlined above, you still may want to reconsider trying to keep your IRA precious metals in your possession. Individuals that maintain possession of the physical precious metals for an IRA are more likely to get audited by the IRS. Should such an audit turn up anything that disqualifies you from being able to hold the physical precious metals, the tax-deferred status of your metal could be revoked. This could mean that you are immediately taxed on your holdings.
For most individuals, the risks simply aren't worth the possible rewards of holding the precious metals for an IRA in your home.
Are There Any Penalties for Storing IRA Precious Metals at Home?
Yes, if you store IRA precious metals at your home without satisfying each and every requirement set forth by the IRS (and continuing to satisfy those requirements), you could face serious penalties and taxes.
Typically, IRA holders enjoy a tax-deferred status on their holdings. This means that you don't need to pay higher taxes when you add the metals to your IRA, but that you'll be able to defer tax payments to the future when you withdraw funds (and may be in a lower tax bracket). However, if you are holding your precious metals at your home without satisfying all of the requirements outlined above, then this tax-deferred status could be revoked. This would mean that you are immediately liable for all the taxes due on the precious metals in your account, rather than paying in smaller amounts when you take disbursements upon retirement.
Depending on the value of the precious metals in your account, this could be quite a hefty tax bill that you won't want to be responsible for paying. If you've already begun taking withdrawals from your account, and you haven't reached the minimum retirement age of 59 ½, you could also face additional penalties. Early withdrawals from an IRA are charged a 10% penalty.
Why Do Some Companies Advertise Home Storage IRAs?
You may have noticed that some precious metals providers advertise IRA home storage. Now that you know how rare it is for individuals to qualify for home storage, as well as how costly it can be to do so without satisfying all of the IRS' requirement, why do so many companies offer it?
The precious metals dealers that advertise home storage should not be trusted. At a minimum, they are using deceptive advertising techniques to get individuals to use them to purchase their precious metals. Should these companies follow through with their offers of home storage options, they're exposing customers to huge fees and penalties. They could even be encouraging illegal activity and exposing you (and themselves) to legal troubles.
If you see a precious metals provider advertising home storage for the precious metals in your IRA, walk away and look for a more reputable company to work with.
Where Are the Precious Metals for Gold IRAs Held?
While you may be sad to learn that you won't be able to hold the precious metals for your IRA at your home, you shouldn't need to worry about their security. The precious metals for a Gold IRA must be stored in an IRA-approved depository. These depositories all meet the stringent requirements set by the IRS to ensure that an individual's precious metals are protected and secure.
Some of the different IRA-approved depositories you can consider include:
Benefits of Storing Precious Metals in an IRS-Approved Depository
There are a number of benefits of choosing to store your precious metals in an IRS-approved depository. First, as we established above, failing to store your precious metals in an approved depository and attempting to keep them in your own possession could lead to high fees and penalties.
In addition to this, though, there are other positive features offered by IRS-approved depositories.
The security you'll find in an IRS-approved depository will be much higher than anything you'd be able to replicate at home. Most depositories offer state-of-the-art advancements, such as automatic re-locking, motion sensors, timed locks, and more.
Precious metals stored in a depository will be (in most all cases) fully insured. Many of the larger depositories offer full-coverage insurance policies up to $1 billion.
Storing your precious metals in one of the secure IRS-depositories will protect them against theft, damage, or loss. You can rest easy knowing that your investment is secure and will be ready for you when you are old enough and ready to begin taking withdrawals.
When Can You Begin Making Withdrawals From Your Gold IRA?
According to the regulations set by the IRS, individuals must be at least 59 ½ years old before they can begin to withdraw funds from a Gold IRA without facing any penalties. Once you reach the age of 59 ½ years old, you don't have to take funds out of your account, though. If you decide that you want to leave the precious metals alone and allow their value to continue to increase, that is fine too.
However, once you turn 72 (or 70 ½ for those born prior to July 1, 1949), you are required to begin taking disbursements. The required minimum distribution (RMD) will vary based on a few different factors, such as the total value of your Gold IRA and your life expectancy (based on IRS estimates and averages).
If you run into financial difficulties and need to access the funds in your IRA before you turn 59 ½, you can make a withdrawal. However, you'll be charged penalties, so it is best to try to avoid any early withdrawals unless absolutely unavoidable.
Do You Have to Sell the Coins or Bars in a Gold IRA?
Once you have reached the age of 59 ½, you can choose whether to liquidate your precious metals to receive cash or to have the physical coins and bars sent to you. This provides you with more flexibility. If you'd like to hold the coins and bars to let their value continue to grow, or if you need the funds, sell them to cover other expenses.
While it may sound tempting to hold the physical precious metals for your Gold IRA in your home, in nearly all cases doing so is not approved by the IRS and could lead to hefty fees and penalties. If you want to hold the physical coins and bars if your IRA, you'll have to wait until you are at least 59 ½ and old enough to begin taking withdrawals from the account. Before this time, storing your precious metals in an IRA-approved depository, such as the Delaware Depository, is the most secure option that will also protect you against unnecessary fees and penalties.