Starting a self-directed IRA is an exciting experience for many investors, especially if it involves precious metals. The safety and stability of assets like gold coins are often unbeatable, so it’s no surprise that those preparing for retirement want to get them. When it comes to a precious metals IRA, home storage is one of the first things that comes to mind.
While it sounds like an attractive option to have all your precious metals at home, there are some things you must evaluate first. There are gold IRA companies that advertise a home storage gold IRA as the best solution to protect your funds, but that isn’t quite right.
Today, you’ll discover whether investing in a gold IRA account and storing your assets at home is worth it.
Can You Set Up a Home Storage Gold IRA?
“Technically,” you can store your physical gold at home, but doing so would break the IRS rules.
If you want to get all of the tax benefits of a gold IRA, then home storage shouldn’t be in your cards. In a nutshell, even if you work with the best gold IRA companies out there, you must store your gold and other precious metals in approved depositories.
Is It Legal to Hold Gold in Your IRA?
Yes! You can hold gold and silver coins in your IRA, as long as you have an eligible account. If you have a traditional IRA, you can start a rollover process and open a self-directed account with a reputable company.
Once you open the account, you can work with a safe and reputable gold IRA company and get the assets you want.
There are many amazing companies to open your gold IRA today, including Augusta Precious Metals or Noble Gold, but that’s another topic. You can check reviews on the most popular gold IRA companies on our website.
Is It Legal to Store Assets from Your Precious Metals IRA at Home?
It’s normal to ask yourself: “Can I store my gold IRA at home?” In some way, it sounds logical.
You would have easy access to your IRA gold at home, and you would be able to manage it without the intervention of a third party. Unfortunately, Section 408(m) of the IRS states a few rules surrounding what precious metals are eligible for tax benefits.
If you read further into that document, you’ll notice the IRS also states that the assets you get for your gold IRA account must be in your trustee’s possession.
Gold assets (and other precious metals) are considered collectibles under the IRS rules. These rules also state that you can’t hold collectibles in an IRA unless they’re in the physical possession of an IRS-approved trustee.
In other words, a home storage gold IRA isn’t possible if you want to avoid penalties. You should always seek IRS-approved gold IRA depositories to take full advantage of your account.
There’s a workaround to this issue, although it’s complicated. Remember that as long as your assets are in the possession of a trustee, everything should be fine. If you become your trustee, you could technically store your gold.
However, the process involves:
Creating an LLC in your name.
Get a specially written operating agreement.
Have a net worth of over $250,000.
Have a $250,000 fidelity bond as corporate insurance if you have employees (your corporation can’t be owned by one person only).
Have experience with accounting, auditing, storage requirements, and more.
Even if you comply with all of these rules, you can’t store your gold at home. It must be in a secure location under your LLC’s name.
In other words, home storage gold IRAs aren’t too convenient if you don’t already comply with all of those requirements.
Potential Penalties for Storing Your IRA Gold at Home
We’ve mentioned you can get penalized for having a home storage gold IRA, but what do these penalties entail?
The primary consequence of having a home storage gold IRA is that your assets will qualify as distributions. If you’re under 59.6 years old, you will get a 10% penalty on the amount of money that your assets are worth.
On the other hand, having a home storage IRA would mean that your investments wouldn’t be tax-deferred. This means that you will have to pay income taxes on all your physical precious metals.
Regardless of the number of IRA assets you got, storing them at home will likely involve a lot of money spent on taxes.
Finally (and this is one of the most severe consequences), having your physical gold at home could expose you to an IRA audit. The IRS often audits people when it notices suspicious activity in their accounts, so if it notices you’re storing your physical gold improperly, you could get audited.
Depending on the case, you could get even more penalties, as the IRS states that storing IRA gold at home while knowing it’s not allowed could be considered a criminal offense.
Besides the legal problems that come with home storage gold IRAs, keep in mind that storing your assets at home increases the risks of getting them stolen. Storing your gold at home means you won’t get insurance for any damage or robbery, so you could lose your investment if that happens.
The Problem with Misleading Advertisements
A common problem with these delicate investments is that there are many ads on the internet promoting the home storage of a gold IRA.
These “companies” offer “home storage kits,” which basically means you get a personal safe with your precious metal purchase. However, if you consider everything we just mentioned about home storage IRAs, you’ll notice that these ads are potentially encouraging illegal activity.
Since the ads are very misleading, they’re meant to take advantage of inexperienced investors. This is why it’s so important to educate yourself on how gold IRAs work and what the best way to invest and protect your retirement funds is.
In any case, if you want to invest with a gold IRA company legally, you must:
Purchase IRS-approved gold bullion only.
Store the assets in IRS-approved trustees or banks.
Even if you see an ad promoting a home storage IRA with “100% guaranteed safety,” remember that you would be getting exposed to potential fines and penalties.
Some companies promote their ads with a guide to open your own LLC, but as you could see on this page, that process is also too complex and expensive for the average investor.
Should People Set Up Home Storage Gold IRAs?
To summarize, gold IRA storage at home isn’t worth it.
It’s too risky for individual investors, meaning you would always be exposed to legal problems with the IRS. Even if you don’t get penalized, you’re still exposing yourself to getting your gold stolen.
Storing your precious metals at home sounds too good to be true, and that’s because it is. If you want to invest the right way, make sure you only work with professional gold IRA companies with a positive track record surrounding these investments.
Additionally, you should educate yourself on what the best practices to spend on precious metals are. There are many articles on our page and the rest of the internet, so rest assured that there are many resources you can take advantage of.
Bottom Line - How Can You Invest in Gold and Silver Coins Safely?
Gold IRAs are excellent options for those wanting to protect themselves against inflation, but you must be smart when opening them.
First, find an IRS-approved custodian, as they will help you handle disbursements, keep track of your account, and take care of any reporting.
Once you open your self-directed IRA, you can decide to either transfer or roll over your funds from your previous retirement account (or you can also make a wire transfer). Finally, you can choose what precious metals you want to purchase, and everything will go into an approved depository.
Unfortunately for most people, gold and other precious metals are very attractive in today’s market, meaning there are many scammers out there trying to steal money from inexperienced investors.
Thankfully, it’s not impossible to avoid those people. As long as you compare different companies, check reviews, and do as much research as possible, you’ll ensure a smooth and easy investment process that follows the IRS rules.
About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started IRA Investing to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.
