You can hold real, physical gold bars and coins inside a tax advantaged retirement account. The Internal Revenue Service allows this through a self directed Individual Retirement Arrangement, which is commonly called a Gold IRA.
To do this, you must work with an IRS approved custodian to set up the account, purchase eligible metals from a dealer, and store them in an approved secure depository. You cannot keep this gold at your home, or you will face severe tax penalties.
How IRS Rollover Rules Work for Your Existing Account
Most investors fund their precious metals account by moving money from an existing retirement plan. You can move funds from a traditional IRA, a Roth IRA, or a employer sponsored plan like a 401k. To make this change without paying taxes or penalties, you must follow strict IRS rules.
A direct transfer is the safest way to move your money. With a direct transfer, your current custodian sends the funds directly to your new Gold IRA custodian. The money never touches your personal bank account. You can do as many direct transfers as you want each year, and there is no risk of missing the tax deadline.
A sixty day rollover is another option, but it comes with risks. With this method, your current custodian sends the money to you. You then have sixty days to deposit the full amount into your new account. If you miss the sixty day deadline by even one day, the IRS will treat the money as a taxable distribution. If you are under age fifty nine and a half, you may also owe a ten percent early withdrawal penalty. The IRS also limits you to only one sixty day rollover in any twelve month period.
Before you make any changes to your retirement savings, you should consult a certified financial planner. These professionals can look at your specific tax situation and help you decide if moving your funds is the right choice. To learn more about the basics of this process, read our guide on how to Protect Your Retirement with a Gold IRA A Simple Guide.
What Coins and Bars Are Allowed in Your Account
You cannot put just any gold coins or bars into your retirement account. The IRS sets strict purity standards for all precious metals held in a tax advantaged plan. For gold, the minimum purity requirement is ninety nine point five percent, which is written as point nine nine five fineness.
The most common eligible gold coins include American Eagle bullion coins, Canadian Maple Leaf coins, and Austrian Philharmonic coins. Some gold bars from certified mints are also allowed if they meet the purity standard. You cannot hold collectible coins, rare coins, or numismatic coins in your account. The IRS views collectible coins as personal items, and buying them with IRA funds is treated as an instant tax distribution.
Your custodian will help you verify that the gold you buy meets these exact standards. Working with an experienced custodian is the best way to avoid buying the wrong metals. You can learn more about finding a partner by reading about Choosing The Right Gold IRA Custodian For Your Retirement.
How Storage Works in Approved Depositories
The law requires your physical gold to be stored in an IRS approved depository. These are highly secure facilities that use advanced security systems, armed guards, and full insurance coverage to protect your wealth. You cannot store your retirement gold in a home safe, a local bank safety deposit box, or any personal storage unit.
When you set up your account, you will choose between two storage options. Segregated storage means your gold is kept in its own private space, completely separate from the gold owned by other investors. Allocated storage means your gold is stored alongside gold from other investors, but the depository tracks exactly which coins and bars belong to you.
Depositories charge annual fees for these storage services. Segregated storage is usually more expensive because it requires dedicated space. Your custodian will collect these storage fees from you and pay the depository on your behalf.
How to Evaluate Custodian Fee Structures
Setting up a precious metals account involves several costs that you do not usually see with a traditional stock account. You must evaluate these fees carefully before you choose a provider, because high annual fees can eat into your retirement savings over time.
Most custodians charge a one time setup fee when you open your account. After that, you will pay annual maintenance fees. The best custodians charge a flat annual fee rather than a percentage fee. A flat fee stays the same even as your gold increases in value. A percentage fee grows larger as your account balance grows, which can become very expensive over twenty or thirty years.
You will also pay separate storage fees to the depository, and you may face transaction fees every time you buy or sell gold. Be sure to ask for a complete, written list of all fees before you sign any paperwork. Do not work with any company that refuses to disclose their fees in writing.
Step by Step Process to Open Your Account
Ready to start the process? Here is exactly how to set up your account from start to finish.
- Choose an IRS approved custodian who specializes in self directed precious metals accounts.
- Establish your new account and pay any initial setup fees.
- Fund your new account by initiating a direct transfer or a rollover from your current retirement account. If you want to move funds from your workplace plan, you can read our step by step guide on How to Transfer Your Existing 401k to a Gold IRA.
- Select an IRS approved precious metals dealer to purchase your gold.
- Instruct your custodian to pay the dealer and have the gold shipped directly to your chosen secure depository.
Once the depository receives your gold, they will catalog it and send a confirmation to your custodian. Your custodian will then update your account statement to show that you own the physical metal. You will receive regular statements showing the value of your holdings, just like you do with a traditional retirement account.