According to the Taxpayer Relief Act of 1997, you are allowed to invest a part of your IRA funds in precious metals such as gold, silver, platinum, and palladium. The law specifically mentions the Gold, Silver, and Platinum Eagles as well as coins issued under the laws of any state, which implies that you can invest your IRA funds in any coins from any country. However, the Internal Revenue Service places some restrictions on the types of coins that can be included in an IRA portfolio.
Investing in precious metals has long been an attractive and effective way of safeguarding wealth from the volatility of paper currency and related investments. This is why investment managers advise people to invest a portion of their portfolio in gold and other precious metals. With the enactment of the Taxpayer Relief Act of 1997, it became legal to include gold in an IRA account.
Can Every IRA Invest In Gold?
Not every IRA account can hold gold and other precious metals as an investment. For this to be possible, you need to have a precious metal IRA. A Gold IRA or precious metal IRA is different from the traditional or Roth IRA in many ways. The Gold IRA allows you to invest in so many options, whereas, this is not possible in traditional and Roth IRAs. With a Gold IRA, not only can you invest in precious metals such as gold, silver, palladium, and platinum, you can also invest a part of your IRA portfolio in real estate, private market securities, commodities, private placements and so on.
Also, a Gold IRA is self-directed. By self-directed, it means the owner of the account is responsible for making every investment decision concerning the account. This can be good and also bad, good in the sense that having a Gold IRA allows you to diversify your IRA portfolio more than any traditional or Roth IRA can ever permit. On the other hand, being self-directed can also mean that the risk of losing your investment can be higher, especially if due diligence is not followed before investing in the myriad of options permitted in the self-directed IRA.
Additionally, the self-directed IRA requires a custodian like every other type of IRA. However, the custodian that manages a self-directed IRA is different from the regular custodian that manages a traditional or Roth IRA. This is because a gold IRA accommodates more investment options, making its management more complex. Thus, the charges for owning a Gold IRA can be higher than regular IRAs, but the payoff is also more significant.
Gold Coins Acceptable In An IRA
If you have opened a Gold IRA, you can invest a part of your IRA funds in precious metals. However, remember that not every gold coin can be included in the IRA. For a gold product to qualify as an investment in an IRA, the coins must be issued by the official mint of a nation or an approved refiner in the case of bars. Furthermore, all physical gold or precious metal investments held in an IRA must be in possession of the custodian or a third-party depository sanctioned by the Internal Revenue Service (IRS).
According to the IRS, only gold coins of 99.9 per cent purity or 24 karats can be included in a self-directed IRA. However, the American Eagle Coin, a 22 karat gold coin is exempted from this rule. Also, coins from the US Treasury that can be added to the gold IRA must contain one-tenth, one-quarter, one-half, or one ounce of gold. The IRS classifies some items as collectables, and these cannot be added as an investment in the IRA except for the Proof Gold Eagle coins.
Some of the IRA-approved gold coins include:
- 22 Karat American Eagle Coins
- Gold Buffalo Coins
- Gold Eagle Coins
- Proof Gold Eagle Coins
- Burnished Gold Eagle Coins
- Gold Mexican Libertad CoinsAlso allowed are:
- Gold From PAMP Suisse
- Chinese Gold Panda Coins
- Australian Gold Kangaroo Coins and Gold Nuggets
- Canadian Gold Maple Leaf Coins
- Austrian Gold Philharmonic Coins
- Gold Britannia Coins
- The South African Gold Krugerrand Coins
Additionally, the precious metals IRA can also hold silver coins such as:
- The US Treasury-issued Silver Eagle Coins
- The Chinese Silver Panda Coins
- Mexican Libertad Silver Coins
- Canadian Maple Leaf Silver Coins
- Australian Silver Koala
- Australian Silver Kookaburra
- The Austrian Silver Philharmonic.
Gold IRAs can also hold platinum products such as:
- The US Platinum Eagles,
- Canadian Platinum Maple Leaf Coins
- Australian Platinum Koalas
- The Isle of Man Platinum Nobles
Some custodians will only hold precious metal products from the US Mint, while others may allow precious metal coins from the mint of other nations and approved private refiners. This is why it’s important to check the regulations of your custodian regarding the types of coins they allow in their IRAs before investing.
Tips For Buying Gold Coins
Buy American Or Canadian Gold
When buying gold as an investment in your IRA, it’s easier and safer to buy gold products produced in the United States and Canada. In addition to being easier to buy, you are sure of the purity of American-issued gold products.
Beware Of Counterfeiters
It’s important that you only buy gold from reputable and trustworthy dealers to avoid losing your money to counterfeiters. You can get help from a financial adviser on where to buy your gold. Never buy gold and other precious metals from people advertising online at giveaway prices because you may lose more than you could ever gain if the deal were successful.
Ask Around
Due diligence includes shopping around for the best deal before buying gold with your IRA funds. You can check the US Mint website for the location of dealers all over the country. When you shop around, you can always get the best prices and lowest premium, two factors that are critical to the profitability of gold investments.
Bullion Coins Make Better Investments
It’s advisable to invest in bullion coins instead of collectables because they have steadier value retention than collector coins. Bullion coins are different from collectables in the sense that they are not hunted by collectors, although they might be worth less than collector coins due to the latter’s numismatic value. The Proof American Eagle coin is the only collectable coin allowed to be held in an IRA portfolio.
One-Ounce Coins Are Cheaper
While the IRS allows different denominations of gold coins in the IRA, it makes economic sense to buy the one-ounce size as it reduces the premium you would have paid if you bought more of a lesser denomination. So if you intend to buy 400 ounces of gold, the premium you would pay on 400 one-ounce coins will usually be less than the premium on 800 half-ounce coins.
Additionally, you can also invest in liquid gold products in an IRA account. Some of the permitted liquid gold products you can add to a self-directed IRA include gold-backed mutual funds, gold-backed ETFs, stocks of gold mining companies and so on.
While gold investments are an excellent way of diversifying your IRA portfolio, you need to be careful to avoid breaking IRS rules regarding investments that can be added to a gold-IRA. To avoid any disagreement with the taxman, it’s important that you speak to a financial adviser about the legality of any transaction before going ahead to include it in your IRA. It is also advisable to retain the services of an experienced tax lawyer or a professional gold IRA investment company with a solid track record who can guide you through the process to avoid flouting tax rules.
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