Precious Metal IRA Rules and Regulations
Friday, February 23rd 2024
A lack of clear and concise knowledge is the biggest obstacle preventing people from reaping in the benefits of a gold IRA rollover. Some of the biggest misconceptions surround the rules and regulations governing gold IRAs. To make everything a lot clearer and help you avoid any hassles, here is everything you need to know about the rules and regulations surrounding gold IRAs.
Where can you open a Gold IRA?
Not everyone can open a gold IRA for you. You need to apply through an IRS approved administrator also known as a custodian to open a gold IRA. This is necessary because you cannot personally buy gold and other precious metals for your IRA. In fact, you cannot do any transactions on behalf of your gold IRA and that is where the administrator or custodian comes in.
It is paramount to ensure that they are indeed IRS approved as there are a host of so-called custodians out there who do not have the necessary approvals. The best way to choose a good administrator is by looking at their past history and going for one that has been in the game for a decent amount of time and has mostly positive reviews from its customers.
How many IRA accounts can you have?
This is another doubt people have. If you are already contributing to an IRA, will you be able to start a gold IRA? The answer is yes. You are allowed to open multiple IRA accounts but you have to ensure that you do not cross the contribution limit for each type of IRA.
Your tax advisor will be able to let you know the exact amount you can contribute to each type of retirement account and as long as you follow that, you are actually making the wise decision of further diversifying your retirement funds.
Which precious metals can you buy?
Not all precious metals are created the same and not all types of gold are the same either. To avoid any discrepancies in value, the IRS has approved a list of precious metal types that can be a part of your Gold IRA. These are
- Gold: American Eagle coins, Australian Kangaroo or Nugget coins, Austrian Philharmonic, Canadian Maple leaf coins, Credit Suisse gold, US Buffalo Gold, Pearl Harbor Coins, Perth Mint coins
- Silver: American Eagle coins, Australian Kookaburra coins, Austrian Philharmonic, Canadian Maple leaf coins, Mexican Liberated coins
- Platinum: American Eagle coins, Australian Koala coins, Canadian Maple leaf coins, Isle of Man Noble coins
Apart from these, you can have Palladium bars and coins with a minimum purity of 99.9%. Other foreign gold, silver, and platinum bars are also deemed acceptable if their purity is at least 99.9%. However, to be on the safe side, it is best to go with one of the listed coins or bars.
This is another reason why you need a custodian. The IRS does not allow you to simply store gold and precious metals anywhere. You need an off-site depository that is IRS sanctioned to store them. If you came into actual possession of the gold and other precious metals, it will be treated as a distribution and you will be liable to taxes and possible penalties too.
You can also opt for home storage but even then, you need a custodian as they will be the ones handling the gold and other precious metals. Irrespective of where the storage vault is, the gold and precious metal won’t leave them until you decide to sell them or opt for a distribution which is again something you will need your administrator or custodian for.
Can you take actual possession of the gold?
Yes, you can take actual possession of the gold and other precious metals in your IRA but only after you reach a minimum age of 59.5. That is right, you won’t incur any penalties and you can have actual gold to be used as you seem fit. However, as we explained earlier, doing so before the age of 59.5 will be treated as a distribution.
Taxes and contribution limits
There is a contribution limit which is the maximum annual contribution you can make to your Gold IRA. It is currently $5,000 per year before the age of 50 and $6,000 per year post 50. Another thing to keep in mind is that if you decide to withdraw the gold and other precious metals before reaching retirement age (age more than 59.5), you are liable to full income tax on the current value of the gold or other precious metals.
Apart from this, a 10% tax penalty will also be applied. On top of these, a 28% capital gains tax will be levied on any profits you make based on the original costs at the time of purchase. It is therefore absolutely necessary to ensure that any money you use to buy gold and other precious metals for your Gold IRA is money you won’t need before your retirement.
What is the retirement age limit and early withdrawal
While you cannot withdraw the gold and other precious metals before the age of 59.5, you do not have to do so immediately after reaching this age. In fact, you can keep your gold IRA as is until the age of 70. However, once you reach 70, you must start receiving withdrawals and distributions.
When are early withdrawal penalties not applied?
The early withdrawal penalties that we mentioned can form a large chunk of your savings and an emergency is not something you can predict. The IRS does allow the exemption of penalties in such cases and these include
- The Gold IRA holder becomes disabled
- The Gold IRA holder need medical care but does not have insurance or cash savings to afford it
- The Gold IRA holder is deceased and the beneficiary needs access to the Gold IRA savings
- The Gold IRA holder can no longer pay for insurance due to unemployment
- The Gold IRA holder wishes to buy a home for the first time. In such cases, they can withdraw up to $10,000.
- The Gold IRA holder or one of his immediate family members needs money for their educational expenses such as tuition, books, room and board, and other related expenses. The educational degree in question should be a qualification degree.
There you have it. Hopefully, this helps you get a clearer picture of the laws you need to be aware of when opting for a Gold IRA.