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Americans headed west for the Gold Rush during the 1800s. During the 2020s, they seek to preserve wealth with the Gold IRA. While this Self-Directed IRA offers a great deal of flexibility as far as retirement accounts go, not all gold can be placed within this fund.
The Internal Revenue Code section 408 describes the criteria for IRA-eligible gold. The gold coins that meet these four requirements are the ones that you should consider adding to your portfolio.
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IRA Eligible Gold Coins
#1 Purity Standards
There are all types of gold coin products that are available to investors. However, only ones that meet the IRS purity standards are eligible for inclusion in Self-Directed IRAs. Gold coins that can be placed within this type of IRA are ones that have a purity rating of .99 or higher.
The IRS code allows for one exception. Gold American Eagle bullion coins are acceptable even though they only have a purity rating of .9167.
How does the IRS verify that your coins' purity ratings are legitimate? The agency excludes any gold coins that aren't minted and certified by the U.S. Treasury or produced by an accredited gold refinery.
Your grandfather gave you a dozen heirloom- quality gold coins that his father gave to him after the war. The well-worn coins meet the IRS purity standards for IRA-eligible gold coins, and they have historic value. However, they still aren't good candidates for your Self-Directed IRA.
IRA-eligible gold coins must be in a certain condition prior to purchase. Here are the two types of gold coins that meet the condition requirements.
Proof coins are produced by the U.S. Treasury and are considered to be coins of the highest quality. The Treasury mints these coins in small batches using exacting standards. The coins are hand-polished before being imprinted. They are placed in special packaging and sold with a certificate of authenticity.
The U.S. Mint also produces coins that don't go into circulation, but they aren't made to the strict standards of proof coins. These coins get pressed by the same machines as proof coins, but they aren't hand polished. The uncirculated coins are sold after the U.S. Mint places them into protective packaging.
Both proof and uncirculated coins are bought by investors and collectors. However, uncirculated coins remain a favorite with investors who are interested in less expensive gold assets. When it comes to supply and demand, fewer proof coins are minted, and they are in high demand with collectors. This drives prices for proof coins up.
Uncirculated coins are produced using fewer labor hours, and their slight imperfections make them undesirable with many collectors. Some investors take advantage of uncirculated coins' more plentiful supply and lower prices to seed their Self-Directed IRAs.
The IRS not only cares about what type of gold coins that you buy, but it's also concerned with the purchasing aspects of your Gold IRA. You may have purchased a collection of mint-condition, high-purity gold coins prior to opening your Self-Directed IRA. If you thought that you'd be able to transfer those coins into that IRA and get the tax benefits, you'd be wrong.
According to the rules, investors must open the IRA account, fund it, and then purchase the gold using the cash that's within the account. The actual purchase of IRA-eligible gold coins is done as a partnership between the investor and a custodian. As the investor, you'll need to locate a gold dealer and decide the type and quantity of gold coins that you want. Your Gold IRA custodian will buy the gold coins according to your specifications.
The Self-Directed IRA is an excellent vehicle to take you into retirement with physical assets in hand. However, there are many rules that you must follow in order to make it cost effective. Custodians make sure that you follow all of the rules that are associated with starting and maintaining your Self-Directed IRA. They know the rules about the type of gold you'll need for the account, the maximum value that you can acquire each year, and investment gold storage options.
You've likely kept the gold that you've collected over the years at your home in a wall safe. However, IRA-eligible gold coins must be stored at an IRS-approved facility such as a bank.
If the gold is kept in your home instead of at a bank, the IRS considers the coins to be distributed income. This means that you could lose your IRA's tax benefits and get hit with early distribution penalties if you're younger than 59.5 years of age.
Specific IRA-Eligible Gold Coins
❑ American Gold Buffalo
The American Gold Buffalo coin was minted as a response to fierce competition from foreign gold processors. It's 24-karat gold, which translates to a .9999 purity rating. The American Gold Buffalo coin comes in both proof and uncirculated varieties.
The coins were so popular that the West Point Mint in New York had to stop producing the coins for a while as it ran out of inventory. It started minting the American Gold Buffalo coin again, but the coin now only comes in the 1oz weight denomination.
❑ Canadian Gold Maple Leaf
The Canadian Gold Maple Leaf coin is Canada's official bullion gold coin. It's mined and processed in Canada, and the finished product has almost no base-level metals mixed into the coin. The Maple Leaf gold coin has a purity rating of .999, which makes it one of the purest gold coins in the world.
This coin debuted on the world stage in 1979, and the Royal Canadian Mint continues to improve its processes and certify the coins' authenticity. You can get the coin in several weight configurations, but the 1oz coin is the most popular.
❑ Australian Gold Kangaroo
The Australian Gold Kangaroo is the official gold bullion coin of Australia, and a government-owned company first produced it in 1986. It carries 24-karat gold purity status and remains a solid contender in the world gold market.
The Perth Mint produces the Australian Gold Kangaroo in eight different weights. It offers extra protection for its gold coins by covering each one in a hardened plastic case before selling the coins to investors.
❑ American Gold Eagles
The American Gold Eagle is a patriotic choice for investors, and it's the official gold bullion coin of the United States. This special coin combines gold, silver, and platinum into one distinctive asset for your Self-Directed IRA. The coin comes in four weight configurations, and it's technically legal tender.
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