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The IRS allows certain accounts, including IRAs and Individual 401(k)s, to acquire particular precious metals in the form of an asset without penalty and also in-keeping with the tax benefits that are associated with this type of account.
The acquiring of assets such as gold, silver, platinum, or palladium, within an IRA, is one method of successfully diversifying your current investment portfolio, whether that be for retirement purposes or otherwise. Many investors have experience investing personal funds in precious metals and they now wish to capitalize on this experience to generate wealth which is tax-deferred or tax-free.
The IRA holder must choose a dealer or a broker as well as a depository so as to acquire physical precious metals in their IRA. An IRA is at liberty to purchase precious metals from any non-disqualified individual or entity. The depository is a secured facility where the metals are held under the name of the IRA.
All IRAs must be administered by an authorized IRA provider as is stated by the IRS. However, not all IRA providers will deal with precious metals. You as the IRA holder, should select a dealer/ broker where you’d like to undergo the purchasing transaction, after which, you then direct your chosen IRA provider to send money from your IRA account in order to close the deal. The IRA provider will ensure the paperwork substantiates that the new asset is now part of your IRA, and as such, deserves the tax benefits that are associated with this type of account.
What are the Benefits of Holding Gold in an IRA Account?
The investment allows diversification of an investment portfolio.
You maintain strategic control over the precious metals that are held within your IRA account.
You are at liberty to exchange one type of metal for any other in a swift fashion, depending on prevailing market conditions.
You may buy, sell and also exchange metals without any consequences for tax obligation.
Important Things to Know About the Gold IRA
The IRA owns the precious metals, not the IRA holder. As such, the purchase, shipping, as well as the depository costs will be paid by the IRA. All gains from investments will be returned to the IRA.
Any legal documents that are related to an IRA-owned asset should be in the name of the IRA rather than in the investor’s name.
IRS regulations allow bullion products within an IRA investment account, but do not allow for collectible coins. As such, any coin that has been graded becomes ineligible.
While the assets are held within the IRA, the IRS does not permit the IRA holder to take possession of the physical metals.
All metals held within an IRA account must meet a certain fineness standard which is specified by the IRS. Those standards are as follows:
Gold .995%
Silver .999%
Platinum .9995%
Palladium .9995%
It is worth noting that Gold American Eagles are indeed permissible to be held within an IRA account irrespective they do not meet the requirement of fineness.
Required Due Diligence
It’s entirely down to the holder of the IRA account to perform due diligence. Part of the due diligence involves researching potential dealers as well as depositories and then choosing whichever appears the most appropriate.
When selecting a dealer, you as the IRA account holder may consider various factors such as price, fees, as well as delivery time. On the other hand, when deciding on a depository, criteria such as the location, security procedures, insurance, price, segregated versus non-segregated, etc. all play a part. Do note however that NDIRA fees are separate to dealer and depository fees.
Acquiring Precious Metals in an IRA – Step by Step
Firstly, open and then fund the IRA account – for most IRA custodians, it takes two business days to open an account after receiving an application. The account is then funded with a rollover, contribution, or transfer, which can take several weeks to complete.
Choose the dealer and depository – the IRA can purchase metals from any non-disqualified individual or person. Complete a depository election form, after which, it should be submitted to NDIRA.
A Buy Direction Letter should then be completed and submitted to NDIRA.
The purchase will be agreed to with the dealer, upon which, the dealer sends an invoice to NDIRA.
The IRA funds are used by NDIRA to pay the dealer. NDIRA then sets up the account at the chosen depository in the name of the IRA. The purchased metals are shipped by the dealer to the desired depository.