Having a precious metals IRA can provide you with a lot of financial benefits, especially if you’re saving up for retirement. Thanks to gold IRAs, you can buy physical gold and store it until you’re allowed to make tax-free withdrawals.
The topics around the physical possession of gold can be hard to understand at first. Since we’re talking about a self-directed IRA, there are a few rules to follow if you want to avoid any legal problems.
If you want to hold physical gold in your IRA safely, this article is for you. Keep reading for more information on how you can use your gold IRA account to store physical precious metals.
Can You Have Physical Possession of Your Gold IRA?
Technically, you can buy gold coins or other precious metals and take physical possession of them. The Internal Revenue Service (IRS) has a few rules surrounding precious metals IRAs, though.
If you purchase gold coins or any other precious metal asset for your IRA, you can hold them if:
- You’re at least 59.5 years old.
- Your gold IRA is five years old.
Following the rules allows you to take out your gold bullion and store it anywhere without any tax penalties.
If you’re planning on saving money for as long as possible, keep in mind that the IRS will require you to take “required minimum distributions” once you reach 70. This means that if you reach that age, you must start taking your gold bars, coins, and other contributions you made from your account.
IRS Rules for Holding Gold Legally
There are other rules you must follow besides waiting until you’re 59.5 years old. If you want to invest in a gold IRA, you must also ensure you’re buying “highly refined bullion.”
That means you can only buy gold that is:
- 99.5% pure
- Produced by a nationally-accredited company
- Included with a certificate of authenticity and shipped in its original packaging
If you’re buying coins for your gold IRA, they can’t be in circulation. They should be damage-free too. As for bars, they must be manufactured to the weight the company is advertising.
Now, if you can’t access your gold IRA until you’re 59.5 years old, where will you store your precious metals? According to the IRS, you must store them in a depository approved by it. If you’re working with a reputable gold IRA company, your custodian will be able to offer a few depository options that can keep your assets safe.
Can You Store Your Gold IRA at Home?
One of the first things some investors ask themselves is if they can open a home-storage gold IRA. Many companies are promoting them, so is it true that you can do it?
In short, no; you can’t have home-storage gold IRAs, at least not if you want to avoid problems with the IRS.
Since holding physical gold at home isn’t allowed, doing it under any circumstance can bring you many different consequences, including tax penalties.
Typically, you would get charged with a 10% penalty if you try to store your precious metals at home; this is because the IRS considers holding your gold at home an early withdrawal.
In the worst-case scenario, you could face severe legal problems if the IRS notices you’re illegally holding your gold at home. If you see a company promoting a home-storage gold IRA, the chances are that they’re also promoting illegal activity.
The bottom line is: You can’t take physical possession of your gold or other precious metals at home, at least not if you’re not 59.5 years old.
What Alternatives Do You Have to Store Your IRA Gold?
In any case, the best thing you can do for your gold IRAs is to work with your custodian to find an appropriate depository.
There are several IRS-approved storage facilities where you can save your precious metals until you can withdraw them, so all you have to do is look at each option and see which one fits your needs the best.
All depositories will feature different fees and storage conditions, so make sure you do research before deciding.
Also Read: How to Choose a Precious Metals Depository
What Happens If You Don’t Comply with IRS Rules?
Let’s specify what consequences you’ll face if you take early withdrawals or store your gold IRA at home. I’ve already mentioned the 10% tax penalty, but what else can you expect?
First, you’ll be subject to income taxes on the distributions you make. You may have to pay a lot of money depending on your income tax bracket and how much you’re withdrawing.
However, the most “severe” problem involves IRS audits. If the IRS notices you’re holding your IRA gold anywhere that’s not an approved depository, it could conduct an audit.
Facing an IRS audit is not something you want to face. If it notices you’ve broken other rules besides holding your precious metals at home, you could get heavily fined on top of the penalties you already got.
In any case, you’ll lose a lot of money if you don’t follow the rules stated by the IRS. It’s not worth the risk.
You can buy physical gold outside your gold IRA account and store it anywhere you want (which involves paying income taxes), but if you want to enjoy the tax benefits that an IRA gives you, you’ll have to buy your assets and store them according to the IRS rules.
Is Opening a Gold IRA Hard?
Not at all! Opening a self-directed IRA for your precious metals is not easy, but it doesn’t have to be overwhelming either.
You have three options when opening your precious metals IRA:
- Invest your cash into your account.
- Do an IRA rollover.
- Do an IRA transfer.
According to the IRS, you can only deposit $6,000 per year in your gold IRA. If you’re over 50 years old, you can deposit up to $7,000.
I recommend you work with a reputable custodian and choose a professional gold IRA company. There are many businesses out there, such as Augusta Precious Metals and Oxford Gold Group, that can guide you through the process.
Having physical possession of your gold IRA is possible, but you must follow certain rules if you want to avoid penalties.
In any case, avoid storing your precious metals at home, and wait until you’re 59.5 years old to make withdrawals. That way, you’ll ensure a safe and smooth investing experience for your retirement account.
Other Gold IRA Storage Options:
- Gold IRA Storage at Home
- How to Choose a Gold IRA Depository
- IRS Approved Depository Precious Metals