An interesting fact about an Individual Retirement Account (IRA) is that the federal Internal Revenue Service (IRS) has rules that allow for specific precious metals (such as gold, silver, platinum, and palladium) to be held in IRA accounts. This means that one can take advantage of the tax-advantaged status of an IRA in holding these precious metal assets. There are, however, several important caveats of which to be aware before investing in said precious metals in an IRA.
Firstly, one cannot take physical possession of the precious metals -- they must be held in an approved depository by an authorized Custodial Retirement Trust Company (also colloquially known as an IRA "Custodian"). Taking personal possession of the precious metals constitutes a withdrawal under current IRS rules, and therefore could subject the owner of the IRA to any applicable taxes and/or penalties. Moreover, because the physical precious metals must be held in a depository by the Custodian, this means there are usually fees and regular charges for the continued storage of said precious metals. These additional costs can vary by custodian and should be carefully researched and considered before investing.
Secondly, IRS rules specify exactly which types of precious metals, and also which specific forms of those precious metals, are approved for IRA's. This means that not every form of gold, for example, is allowed in an IRA. Currently, only gold, silver, platinum, and palladium are allowed to be held inside IRA's. Also, for each type of precious metal, only specific issuers, fine contents, and face values are allowed. For example, in platinum (and palladium), only United States Treasury Department Official Mint "American Eagle" dollar coins (in 0.10 oz, 0.25 oz, 0.5 oz, and 1 oz fine contents), Royal Canadian Mint "Maple Leaf" dollar coins (in 0.10 oz, 0.25 oz, 0.5 oz, and 1 oz fine content), and assayed bullion bars (in 1 oz, 10 oz, and 50 oz fine contents) are allowed inside IRAs. Therefore, if one were to purchase a South African Mint 1 oz platinum "Kruger" coin, it could not be held inside an IRA and would not qualify for any type of tax-advantaged status.
Lastly, the precious metals must be purchased through the corresponding IRA Custodian's Capital Markets Department, and they trade much differently than other types of assets that are typically held inside most IRAs (such as common stock, mutual funds, treasury bonds, etc). The Custodian must contact and receive bids from at least three precious metals brokers, and the metals themselves trade at either a premium (a price higher than expected), or a discount (a price lower than expected). What is expected is called the "spot rate" for that precious metal. This means that if 1 oz of gold is valued at a spot rate of $1,000 dollars, one might expect to pay $1,025 dollars to buy 1 oz of gold or to receive $975 dollars in proceeds from selling the same 1 oz of gold.
Before investing in precious metals inside of an IRA, it is of critical importance that one research and carefully consider all the aforementioned details. Also, it is generally a good idea to contact the custodial company of the IRA and ask them for such details and for specific policies and procedures they may have. IRA custodians possess a fiduciary responsibility to disclose any fees, charges, discounts, premiums, and/or dealer concessions to IRA investors, before processing any such transaction.
For more info, contact financial professionals in your area.Share