Are you thinking about rolling over some of your retirement funds to physical Gold with a self-directed IRA? Great thinking, but what are the self-directed gold IRA rules?
What are you allowed to do and what are you not allowed to do?
What are the rules for withdrawals and deposits?
How does it work with taxes?
These are some of the questions that we will answer and much more. The mission of this post is that you should know all the rules you need to know in order to start adding some physical gold to your retirement account.
Before we get into all the rules regarding a self-directed gold IRA account I think it’s important that we discuss what a self-directed IRA really is. Just so that we are on the same page.
After that we will get into the exact rules so just keep reading on and remember, if you have any questions or input please leave a comment below. I would love to help you.
What is a self-directed IRA account?
A self-directed IRA account is basically exactly the same as any other type of retirement accounts like regular IRA, 401(k), 403(b) or a TSP. It is an Individual Retirement Account (IRA).
Although there is a big difference between a self-directed IRA and all the other IRA’s. In a self-directed IRA more trust is put on the persons holding the retirement account to be able to pick investments themselves.
In all the other IRA forms you are very limited in what you are allowed to invest in. In other IRA accounts you are only allowed to own paper assets.
What do you mean by paper assets?
Paper assets are things like stocks, bonds and mutual funds. The reason they are called paper assets is because there isn’t anything with intrinsic value backing them up. Yes there might be a company and all the assets that they have that are suppose to back your asset up but it’s still not the same.
You own a piece of paper that is extremely connected to the economy. For example during the last stock market crash of 2008 people lost around $2 TRILLION in their retirement accounts.
The reason why? Because they just had a bunch of paper assets on the stock market. With paper assets there are little or no security and you can wake up one morning with your retirement savings wiped out in the next stock market crash.
This is one of the biggest reasons that people chose to add some physical gold to their retirement account. Because gold has always been seen as a safe haven. An asset that will protect you from the coming economic collapse.
But in order to be allowed to own precious metals you must have a self-directed IRA account. You are NOT allowed to own anything other than stocks, bonds and mutual funds (paper assets) in the other account types.
So this is the big difference. With a self-directed IRA account you are allowed to diversify and own other things as well. Things like precious metals, real estate, private mortgages, private company stock, oil, gas, horses and intellectual property.
A person having a self-directed IRA account is said to “know more than the general public” about investments and understand the risk. Therefore you are allowed to invest in a lot of other things. But other than that, they are very similar.
What are some of the self-directed gold IRA rules then?
Even though you are given more playing room to choose your own investment strategy there are still a lot of rules that you have to comply with. A self-directed IRA still have to follow the rules and guidelines set up by the IRS.
What type of precious metals am I allowed to hold in my self-directed IRA?
The rules changed in 1997 with the Taxpayer Relief Act where the IRA is saying that: “Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department.”
So in the beginning you were only allowed to invest in coins that were minted by the Treasury Department. Things like the American Gold Eagle for example.
Then in the beginning of 1998 the rules changed again now also allowing you to own certain platinum coins and certain gold, silver, platinum and palladium bullion.
Today the precious metals that you own in your IRA have to fulfill two criteria
- It must be official currency of a recognized public entity.
- The gold most be of at least 0.995 percent purity.
What this means in easier terms is that the precious metals must come from a government entity and be counted as legal tender. It also must have at least 99.5% purity, meaning that for example the gold coin needs to have at least 99.5% pure gold metal.
Do you want to know the difference between investing in gold and silver?
Some of the coins that you are allowed to own are listed below. Make sure that you choose a reputable company to help you convert your IRA to physical gold and they will help you with what metals to pick depending on your investment strategy.
- American Gold Eagle Coins
- Canadian Gold Maple Leaf Coins
- Austrian Gold Philharmonic coins
- Australian Kangaroo/Nugget coins
- Chinese Gold Panda coins
- American Gold Buffalo
- Gold Bars and Rounds that are produced by an approved refinery or national government mint.
- American Silver Eagle Coins
- Canadian Silver Maple Leaf Coins
- Australian Silver Kookaburra coins
- Chinese Silver Panda coins
- Austrian Silver Philharmonic Coins
- Mexican Libertad coins
- Silver Bars and Rounds that are produced by an approved refinery or national government mint.
Even platinum and palladium coins and certain bars meeting the same requirements.
If a company is telling you that you should invest in collector coins (often referred to as numismatic coins) they are trying to scam you! Only invest in gold bullion.
How do you store your precious metals in a self-directed IRA?
To follow the IRS regulation the precious metals must be stored by a custodian or a trustee. A custodian or trustee is a financial institution that have been certified by the IRS.
These institutions are a bank, a federally insured credit union, a savings and loan association or a an approved entity by the IRS. A custodian can also use a private depository, that’s basically a privately held vault.
This is allowed because these vaults have a high degree of security and the holder of the metals is also insured, often all the way up to $1 billion.
Private vaults like this is where you want to store your precious metals. Have you seen the armored trucks driving around with Brink’s on them? That is one of these private vaults that have a tremendous amount of security. You want to find a custodian that let you store your precious metals there.
There are two types of storage that are allowed in private vaults. There are segregated storage which basically means that your gold is mixed up with everybody else’s. There are a vault with maybe 1 ton of gold in it where then people own a share of it.
I do not recommend this because you never know what can happen. There has been stories about these type of vaults selling more claims to the gold than there is actual gold in the vault. Meaning that someone will be standing without any physical gold in the end.
The second choice is what you want. This is segregated storage meaning that you basically have a safety deposit box in the vault where your gold is stored. There are serial numbers on the gold bars and they are entitled to you. No matter what happens to the vault the gold is in YOUR name.
Look for a custodian that lets you store your gold in a private highly secure vault like Brink’s with segregated storage. At the end of this article I will show you one company that can help you with this, for a flat fee. They are the only one’s in the industry doing that.
But before that, lets finish talking about some of the self-directed gold IRA rules.
Anything special with withdrawals and deposits?
You are not allowed to deposit as much in a self-directed IRA every year as you are in a regular IRA. The government wants to “protect” you. Which they do by fooling you into very risky paper assets.
Anyhow, you are still allowed to contribute $5,000 every year and $6,000 every year after you’ve turned 50 years old. This means that you can still have another form of retirement account at the same time and invest the rest in the risky papers.
Withdrawals are also the same as regular IRAs. You are not suppose to withdraw your funds before you retire. You will be penalized 10% if you withdraw your funds before you are 59 ½ years old. You will also have to pay taxes because these accounts are tax-free because they should be for your retirement.
How does it work with taxes in my self-directed gold IRA?
We have already touched on taxes a bit when we talked about withdrawals of your account. More than that a self-directed gold IRA is the same as a regular IRA account.
All your contributions to the account are tax-deductible. For example if you put in $4,000 into your self-directed IRA and you are in the 25% tax-bracket your tax liability decreases by $1,000.
You don’t have to pay any taxes on those $4,000 so you get 25% of $4,000 “back”. Meaning that there is $1,000 you do not have to pay in taxes.
Transaction inside the account such as interest, dividends or capital gains are NOT taxable as long as the money is in the account.
The most important thing is that you can rollover your current IRA to physical gold, TAX FREE. You can do this be taking help of a trusted custodian that will help you with this.
Who is the trusted custodian you said you would show me?
Okay, now we have gone through most of the rules there is with a self-directed gold IRA. These are all the rules and guidelines that you need to know.
Now what? Is maybe your question.
Well, as promised I will show you where you can get segregated storage at Brinks for your physical gold IRA.
When you decide to add some physical gold to your IRA it’s very important that you take the help of a trusted company. They will help you with all the paper work and answer all of your questions.
Regal Assets have a A+ rating by the BBB and a AAA rating by the BCA. They have been featured in Inc. 500 where they ranked number 20 in financial services companies.
Regal Assets have also been featured in Forbes Investment Guide.
They have over 920 reviews on Trustlink and have a 5 start rating. All other gold IRA companies have maybe around 50 reviews and not any 5 star ratings.
Regal Assets is without a doubt the must talked about gold IRA company and there isn’t any other company that’s even close to having the same amount of reviews and endorsements.
Not just that. They have a very helpful staff that’s not pushy at all. You can contact them today to ask any other questions and they will gladly answer you. Or you can download their FREE gold IRA rollover kit where you can learn even more.
Now that we have gone through the self-directed gold IRA rules I suggest that you read the review of Regal Assets where you will learn more about this company. Also do your own research and please leave me a comment below if you have any input or questions.