Can You Take Physical Possession of Gold in Your IRA?

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Did you know that you can hold physical gold within a retirement account like an IRA?

Called a gold IRA, it’s a fascinating strategy that can help you maintain the purchasing power of your retirement portfolio’s assets. How does it work?

What exactly is a gold IRA, and how can it benefit you? Where do you purchase gold for an IRA?

Where do you store the physical gold, and when can you take physical possession of it?

This article answers all of these questions. Discover what a gold IRA is, its benefits, how to invest in gold with an IRA, and how to take physical possession of your gold at the appropriate time.

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What Exactly is a Gold IRA?

A gold IRA is a type of self-directed individual retirement account (SDIRA). You can use it to invest in and hold physical precious metals, namely gold.

Choose between a traditional or a Roth gold IRA. With a traditional gold IRA, you make pre-tax contributions, while a Roth gold IRA allows you to make post-tax contributions.

Discovering Gold IRAs

Later, withdrawals of contributions and earnings from a Roth gold IRA are tax-free. Withdrawals from a traditional gold IRA are taxable. For the sake of clarity, this article uses the term gold IRA for both traditional and Roth gold IRAs, specifying their key differences as needed.

When Can You Take Physical Possession of Gold in Your IRA?

You can withdraw cash contributions (but not earnings) from a Roth gold IRA at any time without taxes or penalties. When you’re at least 59½ years old and your gold IRA is at least five years old, you can withdraw tax and penalty-free contributions (physical gold) and earnings. The same rules apply when making withdrawals from a traditional gold IRA, except the withdrawals are taxable.

Before you’re eligible to withdraw contributions and earnings from your gold IRA, you must store your gold in an IRS-approved depository. Taking possession of your gold IRA’s physical gold before you're 59½ or before your IRA is five years old incurs income tax and penalties.

The IRS requires you to start making withdrawals called required minimum distributions (RMD) in your early 70s. However, RMDs only apply to traditional gold IRAs. Roth gold IRAs don’t have this requirement.

How Do You Open a Gold IRA?

Setting up a gold IRA is easiest when you have a team of seasoned experts working with you. There are several preliminary steps necessary to set up an account. The process ensures that your gold IRA complies with IRS regulations.

Find a Reputable Gold IRA Broker and Open an Account

Finding a reputable gold IRA broker can be challenging. It requires some due diligence. Word-of-mouth recommendations are still a great primary source of research. Review sites are another.

There are no specific criteria that define a reputable gold IRA broker. Most are BBB-accredited, have high BBB scores, high star ratings on Trustpilot and Google as well as favorable reviews.

Setting up an account requires you to fill out special tax forms and other paperwork. Most brokers help you with this. The setup process can take as little as 15 to 20 minutes.

Fund Your Gold IRA Account

After setting up your gold IRA, you have to fund it. Gold IRA brokers offer a few different ways to fund your gold IRA. You can do it via bank wire, or you can roll over/transfer funds from an existing retirement account, such as a 401(k) or an IRA with another custodian.

A rollover entails transferring funds between different types of retirement accounts like 401(k) funds rolled over into a gold IRA. There are two types of rollovers: direct and indirect. A direct rollover involves moving funds directly from a 401(k) to a gold IRA.

To complete an indirect rollover, your plan administrator cuts a check in the amount of your account’s assets. The administrator makes the check payable to your new gold IRA. Depositing the check in your gold IRA supplies it with the funds needed to purchase gold.

To initiate a transfer, ask your current IRA custodian to transfer assets from your current IRA to your new gold IRA. When completed before 60 days, rollovers and transfers have no tax penalties.

Purchase IRS-Approved Gold

The IRS categorizes gold bars and coins as collectibles. Per IRS regulations, you can’t invest in collectibles with an IRA. However, there are exceptions.

You can find the exceptions listed on the IRS website. The lists are long and quite convoluted. Fortunately, most gold IRA brokers and reputable gold dealers automatically label the IRA-eligible gold in their inventory. This eliminates the need to sift through lists upon lists of IRA-eligible bullion on the IRS website.

Transfer Your Physical Gold

After purchasing IRA-eligible gold, you need to transfer it into a custodial account. The IRS requires approved custodians to hold your IRA’s physical gold in a secure location. Gold IRA brokers typically have their own team of custodians and associated storage vaults.

In addition to storing your physical gold, custodians also help with tax reporting, purchase transactions, and overseeing the withdrawal of your physical gold. Your custodian is with you for the long haul, delivering administrative support until it’s time for you to legally reclaim your IRA’s physical gold.

How Do You Find a Competent, Trustworthy Custodian?

Fortunately, nearly all gold IRA brokers have a list of preferred custodians and depositories. Most preferred custodians and depositories are already household names, such as AM Global Logistics and Brinks. Some brokers even offer off-shore storage in countries renowned for storing gold, like Switzerland.

Generally, a custodian helps you set up and fund your gold IRA. Choosing a gold IRA broker puts the broker’s team of highly trained custodians at your disposal. Also, many well-rounded gold brokers serve triple duty as sellers, distributors, and custodians of IRA-eligible gold.

Precious Metals IRA vs. Gold IRA

There’s a lot of talk in the news about the precious metals IRA and the gold IRA. What’s the difference? Can you have both?

Yes, you can. In fact, you can have as many IRAs as you like. Your combined annual contribution limits can’t exceed IRS stipulations. In recent years, annual contribution limits to an IRA were about $5,500 to $6,500.

A precious metals IRA contains gold, silver, platinum, and palladium assets. You can invest in one or all of them. A gold IRA can also contain all precious metals, but some gold brokers only offer IRA-eligible gold and silver.

Precious Metals IRA vs. Gold IRA

Experts use the terms precious metals IRA and gold IRA interchangeably. Some precious metals IRAs consist entirely of gold or gold and other precious metals in various amounts. Similarly, a gold IRA can be all gold or a mixture of precious metals. There are even brokers who offer a silver IRA.

How Much Gold to Buy?

How much gold should you invest in your gold IRA? The jury’s still out on this one, with pundits and experts making conflicting recommendations. Some suggest that gold should dominate your precious metals IRA. Others recommend purchasing equal amounts of gold, silver, and other precious metals.

Furthermore, your investments in physical gold should comprise 5% to 20% of all the assets in your portfolio. That includes all the other retirement and investment accounts in your portfolio: other IRAs, your 401(k), and any brokerage accounts.

The recommended investment threshold of 5% to 20% is rather broad. What percentage is best for you? It depends entirely on your goals for today and tomorrow, how much you have to invest, and market dynamics.

This is where due diligence comes in. As the account holder of a gold IRA, you’re responsible for all of the investment decisions. By law, gold IRA brokers and custodians cannot give you investment advice.

Instead, they publish live prices of precious metals, market news, and gold IRA guides on their websites. Most gold IRA brokers also maintain a social media presence where you can find their unique video tutorials, lectures, and expert interviews about precious metals investments.

Exciting Alternative Investments With a Gold IRA

Since the gold IRA is a type of SDIRA, you have the power to invest in a broad variety of assets. You can purchase traditional investment products: stocks, bonds, mutual funds, and exchange-traded funds (ETFs). You can also explore more exciting, alternative investments.

What types of investments? The list is a cornucopia of investment possibilities, covering everything from cryptocurrency to real estate. The following is a short list of the investment opportunities awaiting you.

Real Estate

You can use funds in your self-directed IRA to purchase real estate. You must use the real estate for investment purposes, so you, your family, friends, or anyone that you know cannot live on the property.

However, all the earnings you reap through rentals go back into your IRA. 

Some other real estate investments you can purchase with a self-directed IRA are:

  • Fix-and-flips
  • Commercial property
  • Raw land
  • Farmland
  • Mobile homes
  • Real Estate Investment Trusts (REITs)

A special note on REITs. REITs are companies that own or finance real estate that produces income. Their real estate falls into an enormous range of property sectors, increasing earnings potential. As a REIT stockholder, you earn a share of the income produced.

REITs are self-directed IRA eligible. They represent a solid, low-risk way to earn money from real estate investments. They also eliminate the many random pitfalls involved in owning and keeping up a rental property.

Promissory Notes

You can become your very own single-person bank, using your self-directed IRA funds to make personal loans. A promissory note legally binds the recipient to repay the loan with interest. The interest counts as tax-free income that goes back into your IRA. There are many types of promissory notes to consider:

  • Real estate promissory note
  • Commercial
  • Investment
  • Personal
  • Student loan

Gold and Precious Metals ETFs

Gold and precious metals ETFs are a collection of stocks and bonds. The stocks and bonds correspond to companies that make money in gold and precious metals, from miners and refiners to assayers and even gold dealers.

Unlike mutual funds, ETFs are investment products you can buy and sell on a stock exchange every day.

Gold ETFs

Called paper gold, ETFs are a means to purchase investment products that make money from gold and other precious metals. Some investors prefer this more immediate route to earnings. Gains on ETFs and other assets held in an IRA aren’t taxable, by the way.

Other Assets You Can Purchase With a Self-directed IRA

You can use your self-directed IRA to invest in all of the same assets you can with a traditional or a Roth IRA: stocks, bonds, and mutual funds. Bonds, treasuries, and CDs are fair game as well.

To shake things up, you might also consider investing in:

  • Private equity
  • Cryptocurrency
  • Trading accounts
  • Foreign currency
  • Oil and gas
  • Livestock
  • Theater/movie productions
  • Equipment leasing
  • Food trucks
  • Mineral rights

Taking Possession of Your Physical Gold

When you finally meet the requirements to start making withdrawals from your IRA, you can choose how you want to be paid. You can receive in-kind distributions, that is, your IRA's physical gold delivered to your door.

On the other hand, you can sell your precious metals back to the depository and receive the dollar value of your investment. Your custodian can furnish the IRS with the relevant details before liquidating your gold.

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