If you are in the process of opening a precious metals IRA through establishing a self-directed IRA, you’ll have to comply with the IRS rules that govern this investment. The number one thing to know is that you aren’t allowed to hold your own gold (or silver, etc.) I decided to write about the process of how to choose a precious metals IRA depository for your gold IRA because many people don’t understand this process. Having personally went through this with my preferred gold company, Goldco, I figured I’d detail the process.
First, remember that the moment you have possession of your gold, it will be considered a distribution in the eyes of the IRS. This becomes a taxable event, and accordingly, you’ll want to avoid that. This is why you ship your gold from whomever you decide to purchase gold from to an approved third party depository that works with your IRA custodian.
I’ve made a list of the top companies for gold investments of this nature, and urge you to check it out.
The depositories that you’ll be presented by the custodian you work with serve the purpose of storing your precious metals. A depository is like what Fort Knox does for the government and also like the New York Federal Reserve does for other global governing bodies in the sense that they take physical possession of your precious metals and have a fully secured storage facility and staff who is in charge of it’s safekeeping. Your precious metals will be safe there until you want to withdraw them, which at many times is at retirement age, or whenever you want to change the investment into cash so you can invest the money elsewhere in your retirement portfolio.
Types of Storage
You’ll also be presented with two types of storage: segregated and non-segregated. I chose the segregated option for a $50 more per year fee as this allows me to acquire the exact coins or bars that I purchased. Non-segregated storage means that you will have your investments in their depository along with similar metals that are of the same variety and from the same year. For example, if you invest in a 2008 American Golf Eagle coin, you’ll get one back when you go to make a withdrawal, but it most likely won’t be the exact one that you purchased. Personally, I found the small fee to get the exact metals back that I originally purchased to be a worthy investment, but frankly, both options work.
Insurance and Legal Separation
Most of the depositories will be insured heavily. In fact, if you work with one of the companies on the link I provided above, you can rest assured they will be. Some have up to $1 billion in coverage. They are also structured legally in a way that the depository never owns your metals, they simply act to protect them and safeguard them. This helps you, the investor and owner of the metals, because companies that don’t have this structure could face a legal issue and that could affect your holdings. Yet another reason to only work with a reputable gold company.
Note, it’s very difficult to do this any other way. Read my page about “Can I Set Up a Home Storage Gold IRA?” for further details.
There is an annual storage fee for the safe keeping of your precious metals. Also, as mentioned earlier, the segregated storage will be a tad bit higher. Sometimes you’ll have to pay shipping fees for having your metals sent to you when you eventually obtain them, or when you send them to a company who will end up selling them for you or buying them back from you.
Choices in Depositories
Most companies will allow you to have choices, but some will work with a specific depository as it can make life easier for them in terms of records keeping. You can request to use a depository of your choice, of course, just make sure you do your homework if they aren’t one that the gold dealer works with.
That’s my cliff notes on how to choose a precious metals depository for your gold IRA. I hope you found this guide useful.