Gold Investing in an IRA
When Congress approved IRAs in 1974 as a tax sheltered retirement plan to help workers not covered by company pensions, the accounts could only be funded with cash, stocks or bonds. But in 1997, Congress expanded the rules governing individual retirement accounts to give people who own IRAs the option of also funding them with physical gold and silver coins and bars.
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Same Rules Apply
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People who own traditional and Roth IRAs that contain gold coins and bars must operate under the same rules as conventional retirement account owners. You will not be able to withdraw the gold coins and bars from the account without incurring a penalty until age 59 1/2 years old. Roth IRAs do not have minimum distribution requirements, but those investors with traditional IRAs will have to start withdrawing the gold they've saved in the account starting at age 70 1/2.
Funding Process
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The road to including gold in an individual retirement account begins by contacting a self-directed IRA custodian who handles precious metals accounts. After you open the account and fund it with cash, you will contact a gold dealer and lock in a price for the gold coins and bars you wish to buy. The IRA custodian then issues a purchase order to the dealer and the gold is shipped to a secure depository, such as HSBC Bank in New York. After the custodian receives confirmation that the gold has arrived, the custodian documents it into the IRA and pays the gold dealer.
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Distributions
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One of the great attractions of owning physical gold is being able to see it, hold it and admire its timeless beauty. But when you invest in gold coins and bars through an IRA, you do not have the privilege of holding the metal while it is in the IRA. You can always sell your gold and take a cash distribution from the IRA. You also have the option of taking the gold itself as a distribution.
Purity Requirements
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When Congress approved gold bullion for IRAs, it mandated that only gold coins with a purity of 24 karat would be allowed in these accounts. However, it made a special exception for the U.S. Gold American Eagle, which is a 22 karat coin. The South African Krugerrand, being a 22 karat gold bullion coin, is not permitted in IRAs.
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References
- Photo Credit gold image by Raimundas from Fotolia.com
