The stock market has had a very rough month with losses of roughly 6%. The Dow Jones Inudustrial Average is down over 1% year to date. With all of this uncertainty in the markets nobody knows where it is headed. One smart investing advice that many give is to make sure you are well diversified. Being well diversified in many different types of investment options helps to ease your stress when one of those investment options doesn't go so well. We talk incessantly about how a self directed IRA allows you to diversify your retirement portfolio by investing in non-traditional investments. Below are some common questions clients ask me about investing in gold and silver with a gold backed IRA. If you have any more questions feel free to comment, call or email me.
Q: How is the metal held and stored?
A: All precious metals are stored in our secured vault with Brinks. Tax law requires that a licensed custodian hold precious metals for your IRA. All metals are counted and verified upon receipt in the Brinks vault. You will receive an email notification along with a certificate of ownership when the metals are verified at the Brinks vault.
Q: Are there any taxes?
A: Holding precious metals is no different than any other investment held in your IRA. Any growth or gains in the metals are deferred until you start taking distributions from your IRA account.
Q: Are there any penalties?
A: There are not any penalties or issues with taxes when it comes to buying and holding precious metals in your IRA.
Q: What is the cost for setting up a precious metals IRA?
Setup Fee: $35
Annual Fee: $150
Monthly Storage Fees
Asset Value Of Metals Gold Only Silver Only Both Metals
< $25,000 $8 $10 $10
> $25,000 $12 $18 $18
Q: Are there any minimum purchase quantities?
A: Depending on who the metals are purchased from can determine the minimum quantities. Generally speaking $5,000 is a typical minimum.
Q: What types of metals can be held in the IRA?
A: Only gold coins that are legal tender with 0.9999 fineness are allowed in an IRA, with the exception of the American Gold Eagle, which has a fineness of 0.9167% fineness. Other gold coins allowed to be put into an IRA include the American Buffalo, Canadian Gold Maple Leaf, and Australian Gold Nugget. The popular South African Krugerrand is not permitted to be included in an American IRA because it's fineness is only 0.9167%
The regulations that govern gold contributions to IRAs call for a minimum purity of only 0.995%, most gold bullion bars are 0.9999% pure.
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Q: Can my annual contribution be bullion or coins that I personally own?
A: No, Any annual Roth or Traditional contribution must be in the form of cash (currency). Rollovers and Transfers, though, do not need to be in the form of cash.
Q: Can I take distributions of the physical metal instead of taking cash?
A: Yes. Distributions from an IRA can be cash or non-cash. The only issue will be that the distribution will usually be taxable to you (except for a Roth IRA), which would mean that you would either have to liquidate enough metals to pay the taxes or you would have to use cash from your personal accounts to pay the taxes.
Q: Traditional IRA vs Roth IRA?
A: Traditional IRA’s are pre-tax contributions. Contributions made annually provide you with tax benefits in the year you contribute. Income grows tax free but when distributions are made the income is subject to taxes and your personal rate.
Roth IRA’s are post-tax contributions. Contributions made annually do not provide you with any tax benefit in the year you contribute. Income grows tax free and when you take out distributions are not subject to any taxation.
Q: What is the process to get started?
1. We setup an IRA account
- Upon receipt of your application, we will have the account created and the transfer request sent out within 24 hours of receipt.
2. We forward the IRA transfer request to your current custodian
3. Your custodian sends us the money
- We send wire and mail instructions with the transfer request.
4. We invest your monies as you direct us to.
- The investment direction form, contained in the application, is used to direct us to place your monies in your investment.
Author: Ben Barker, Self Directed IRA Professional