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Can a self-directed IRA (SDIRA) hold physical gold coins? Yes, it can. Called a precious metals IRA, it’s a type of SDIRA that allows for investment in physical gold coins. You can use the same SDIRA to invest in a wide array of precious metals in coin form.
However, there are some key factors to bear in mind. Not all physical gold coins are IRA-eligible.
There are long, dense lists on the IRS website that indicate which types of physical bullion are IRA-eligible.
There are also IRS regulations that you must follow to avoid untimely taxes and penalties.
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Self-Directed IRA 101
Paper gold IRAs, silver IRAs, and IRAs backed by physical gold are all popular examples of a SDIRA containing precious metals. SDIRAs can also contain platinum and palladium. All precious metals held in an IRA must comply with IRS rules for purchase with an IRA.
A SDIRA allows you to invest in and capitalize on alternative assets. Alternative assets expose your portfolio to greater diversification. Your SDIRA can also hold more conservative, traditional assets, like stocks, bonds, mutual funds, and ETFs (paper gold).
Where Can You Set Up a SDIRA?
Most traditional brokerage firms and banks with brokerage arms don’t allow investments in physical gold with an IRA. These institutions typically offer a traditional IRA or a Roth IRA jam-packed with the investment products that they want you to utilize.
That’s why it’s most common to invest in precious metals with a SDIRA. With a SDIRA, you make all of the decisions about what assets to invest in, hold or sell. A reputable SDIRA company can help you set up your SDIRA and get started in precious metals investing.
The IRS’ Rules on IRA-Eligible Bullion
The IRS considers bullion, including gold coins, a collectible. Per the tax law, you can’t invest in collectibles with a SDIRA. There are exceptions.
The IRS allows you to invest in specific precious metals products with a SDIRA. Precious metals brokers who offer IRAs typically designate their IRA-eligible inventory, so you don’t have to do the work. Prospective products must also meet IRS standards for purity values.
IRA-eligible gold and silver must be at least 99.5% and 99.9% pure, respectively. Exactly what coins meet these standards? It’s helpful to take a look at the very types of gold coins and precious metals products you can invest in and hold within your SDIRA.
The American Gold Eagle Coin
First produced in 1986, the American Gold Eagle coin is a product of the U.S. Mint. The Gold Bullion Coin Act of 1985 preceded its debut. To this day, the American Gold Eagle coin remains beloved, valuable, and sought.
It comes in weights ranging from a tenth of an ounce to an ounce, with respective face values of $5, $10, $25, and $50. The coin's perceived value is far greater. As of this writing, the 2015 American Gold Eagle bullion and proof coins sell for about $2,000 to $3,000+.
Bullion coins have a standard finish. Proof coins undergo special processing with multiple strikings that entail unique minting technology and processes. Each proof coin comes in protective packaging to preserve its appearance and integrity. Each coin includes a U.S. Mint Certificate of Authenticity.
The U.S. Mint produces only so many collectible proof coins annually. Their scarcity makes them all the more desirable and valuable. There is a silver version of this coin that’s also IRA-eligible, by the way.
The Canadian Gold Maple Leaf Coin
A product of the Royal Canadian Mint, the Canadian Gold Maple Leaf coin commands its fair share of global fans. Serving as actual currency in Canada, it has one of the highest purity values in the world: 99.9999% to 99.99999%. First minted in 1979, the face values go from $0.50 to $50, the values corresponding to weights of 1 gram to 1 ounce.
There are both gold and silver iterations you can invest in with your SDIRA. As gold and silver prices fluctuate, you can convert all or some of your SDIRA’s precious metals to cash. You can use this cash to purchase more precious metals or other assets.
Australian Gold Kangaroo Coin
Aptly named, this coin is the masterpiece of the Perth Mint. It debuted in 1986, adopting the nickname Australian Nugget coin. Among minters, assayers, and collectors, the Perth Mint’s Australian Gold Kangaroo coin is a ‘gold’ standard, so to speak. It represents the textbook example of how a precious metals coin should be crafted and minted.
As a result, it’s very popular with collectors and investors. Available weight denominations are a tenth of an ounce to 1 ounce. Occasionally, specially minted versions appear in weight denominations of 2-ounce, 10-ounce, and 32-ounce.
Unlike the American Gold Eagle coin and the Canadian Gold Maple Leaf coin, the Australian Gold Kangaroo coin has a face value of $100 corresponding to its 1-ounce weight denomination. The American and the Canadian 1-ounce equivalent is $50.
Other IRA Eligible Gold Coins and Precious Metals
You have many options in the categories of gold, silver, platinum, and palladium. The following list highlights other precious metals products you can invest in with your SDIRA.
Where Do You Store Your SDIRA’s Physical Gold?
Per IRS regulations you must store your SDIRA’s physical gold in an IRS-approved depository. Most gold IRA brokers work with a list of carefully vetted, seasoned, reliable, trustworthy depositories.
In the precious metals industry, the household name depositories include the Delaware Depository, A-M Global Logistics, Brinks, and International Depository Services. After directing your SDIRA’s custodian to purchase the precious metals you want, your SDIRA custodian then transfers the physical gold to an approved depository.
This physical gold must sit in the depository until you’re legally entitled to remove it. Any of your SDIRA’s physical gold stored at home or in a bank safety deposit box counts as a distribution (SDIRA withdrawal). Untimely distributions incur income tax and additional tax penalties.
Taking Possession of Your Physical Gold
You can claim physical possession of your gold without restrictions or penalties when you’re 59½ and your SDIRA is at least five years old. You only need to inform your SDIRA’s custodian, fill out a few forms and await your payment.
Your custodian can liquidate your gold if that’s what you prefer. You can take your distributions in-kind, in the form of the physical gold that you own in your SDIRA. Alternatively, you can sell your SDIRA’s physical precious metals to the depository and receive the cash equivalent.
A Brief Note on IRA Withdrawals
A SDIRA is a type of Roth IRA. With a Roth IRA, you make post-tax contributions that grow tax-free. At age 59½, and after your account reaches five years of age, you can start making tax and penalty-free withdrawals.
Traditional IRAs have required minimum distributions you must start taking at roughly age 70 to 71. Roth IRAs have no such requirements. Also, you’re legally entitled to withdraw your SDIRA contributions at any time without paying taxes or penalties.
When you withdraw contributions, you don’t receive physical gold. The gold is what you purchased, not what you contributed. If you withdraw any of your SDIRA’s earnings or gains, then you must pay taxes on those gains. You might also incur penalties for a premature withdrawal of gains.
Paper Gold and Other SDIRA Investments
Physical gold purchased with your SDIRA can serve as a protective hedge during market downturns and inflation. Physical gold does not accrue interest or pay dividends, however. You make a profit only when you sell it.
Fortunately, there are other noteworthy assets that you can invest in with your SDIRA. These investments pay interest and dividends. Other alternatives, profit-earning assets you can purchase with a SDIRA are:
REITs: Real Estate Investment Trusts are a great way to make money from real estate without having to manage a rental property. REIT companies finance or own real estate that produces profits. The types of real estate encompass a range of property sectors: hotels, apartment buildings, warehouses, and more.
You can also go the traditional route, purchasing a property with your SDIRA. You, your family/friends, or anyone that you know can't use the property. You must rent it to an unrelated third party, funneling your rental earnings back into your SDIRA.
ETFs: Exchange-traded funds are commodities that you can trade daily on a stock exchange. Gold and precious metals ETFs, called paper gold, are ETFs associated with companies deriving profit from the precious metals industry.
The companies fall into many categories, such as mining, refining, and distributing. As of June 2023, there are more than a dozen gold mining ETFs traded on U.S. markets, their total assets verging on $18+ billion.
After getting some experience under your belt using your SDIRA to invest in gold coins, consider the investments mentioned above. You might also do due diligence, exploring investments that align with your interests, hobbies, and knowledge base.
With a SDIRA, the selection of assets you can purchase and hold is enormous. Discover miscellaneous, lucrative investments: promissory mortgage notes, personal loans made with repayment interest, oil and gas, and much more. Each asset can complement and enhance your SDIRA’s gold coins, producing passive income that can support your livelihood eventually.
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