Precious Metal IRAs allow you to hold a variety of different assets like gold. However, not all gold coins and gold bars are eligible for an IRA. The IRS has outlined some criteria and quality standards for the metal.
There are some popular gold coins and bars which are not allowed in an IRA simply because they fail to fulfil the criteria required.
After the Taxpayer Relief Act of 1997, investors have been finally allowed to hold precious metals in different coins minted by the U.S. Treasury Department. These include one-half, one-quarter, one-tenth- and one-ounce U.S. gold coins and 1-ounce silver coins.
Gold Eligibility Criteria
There are numerous tax benefits to holding eligible gold bullion and silver bullion products in your self-directed precious metals IRA. You can inflation-proof your portfolio by using precious metals like silver and gold as an alt. investment in your IRA. Below are the major eligibility requirements the IRS has set forth:
Purity: For a gold bullion product to be eligible for IRA investing, it should be 99.5% pure.
Storage: Gold deposited in the IRA must be contained in one of the approved depositories. These are extremely secure gold storage facilities approved by the IRS. Legitimate bullion brokers and dealers offer such depositories
Custodian: A custodian is mandatory as the trustee of the IRA. In most cases, the investor finds a bullion dealer to buy gold for IRA, and the dealer will help them in setting up their account with a partnered custodian and an IRS-approved depository.
Certification: Any coins, bards, and rounds must be produced by certified/accredited assayers, refiners, or manufacturers. These certifications can be from COMEX, NYMEX, NYSE/Life, LBMA, LME, LPPM, ISO 9000, TOCOM, or the national government mint.
Packaging: Proof coins should have untampered mint packaging and also have their certificate of authenticity.
Weight: Small bullion bars must be manufactured to precise weight specifications.
Do Not Buy Non-IRA Approved Gold
You cannot hold your gold in an IRA, the IRS does not allow it, and you can effectively ruin the tax benefits which you otherwise would’ve received. Companies like Regal Assets and Oxford Gold Group can help you set up an IRA without any hassle of storage.
Non-IRA Approved Gold
IRA Approved Gold
Bank deposit box, home safe, or any location of your choosing
Most companies have a minimum required investment to open an account
Insurance + Postage fees
Usually covered in a/c fees
No mandatory recurring fees
Storage fees IRA maintenance fee Setup fee
Only taxed when withdrawing
Which IRA Eligible Gold Coins & Bars Perform Better Than Others?
Experienced gold investors closely follow the spot price of the precious metal. While the value of gold coins and bars stays mostly the same regardless of which company manufactured them, investors still give preference to some companies when making a transaction.
Spot Price: The current price of a security at which it can be sold or bought at a particular place and time.
Some coins get added value because of their collectability. For example, below is the spot price of gold as of 13th September 2022
American Eagle Gold Coin
Canadian Maple Leaf
So. African Krugerrand
As seen in the table above, the value of all these coins is very close to the gold spot price. We can also see that some coins like American Eagle Gold Coin are worth slightly more than their peers.
In terms of the ROI, a few dollars might not make much of a difference, but if you are planning to liquidate your gold in the future for hard cash, then some coins are much easier to sell than others. And most buyers prefer coins over small bullion bars.
Consider These 4 Things When Buying IRA-Approved Gold
Although you technically don’t need an IRA for investing in gold, the tax benefits you can get from it are worthwhile. Investment in a Roth IRA can grow tax-free and if you withdraw your funds post-retirement, the withdrawal will be tax-free as well.
YOU TECHNICALLY DON’T NEED AN IRA FOR INVESTING IN GOLD, BUT THE TAX BENEFITS YOU CAN GET FROM IT ARE WORTHWHILE
-Ryan Paulson, Chief Editor, IRAEmpire.com
Even then, I won’t recommend a gold IRA to everyone who is planning their retirement. Here are some factors you should keep in mind when considering investing in a gold IRA.
Fees: A traditional IRA is more affordable compared to a gold IRA, as gold IRAs have several recurring fees. These include annual storage fees, account maintenance fees, and sometimes even an initial set-up fee.
Limits On Contribution: If you are under the age of 50, then you cannot invest more than $6,000 per year in a gold IRA, and $7,000 if you are older.
Penalised Early Withdrawal: The IRS has imposed a 10% tax penalty if you withdraw any funds from your IRA account before age 59½. While there are always exceptions, I won’t recommend gold IRAs to someone who plans to liquidate their gold.
Minimum Investment Requirements: Gold IRA companies often have a minimum deposit of $30,000-$50,000. So, it has a challenging entry barrier.
IRA Eligible Gold Coins
Below are gold coins that meet the IRS’ standards:
American Gold Eagle Coin – While The American Gold Eagle coin is 91.67% pure, the weight of the coin is 1.0909 troy ounces, so it still contains 1 troy ounce of gold.
Australian Gold Kangaroo Coin – Gold Crop introduced these coins in 1987, and the Western Australian Government owned 100% of the company. These are considered legalized tenders in Australia and are quite popular among Australian IRA holders.
American Gold Buffalo Coin – These coins were released in 2006 by the United States Mint and were the first 1 oz. 99.99 gold coins. They competed fiercely with Canadian Maple Leaf.
Austrian Gold Philharmonic Coin – The classic Musikverein design of this coin makes it popular among investors. Its design features musical instruments like violin, harp, cello, French horn, and bassoon.
Canadian War of 1812 Gold Coin – The purity and weight of this coin are guaranteed by The Royal Canadian Mint, and these are extremely rare. They were issued on the bicentennial of the War of 1812. They are sold in singles or sheets of 20 by the Royal Canadian Mint itself.
Canadian Gold Maple Leaf Coin – The Royal Canadian Mint guarantees the purity and weight of the Canadian Gold Maple Leaf Coin. You can purchase them in packs of 10 (mint tubes)
Most Popular IRA-Approved Gold Bars
Johnson Matthey Gold Bar – These bars are comparatively harder to find than other popular gold bullion bars. But the Johnson Matthew bars are available in various denominations and are proclaimed to be some of the best gold bars available to investors. They are guaranteed to be 99.99% pure.
Credit Suisse Gold Bar – Credit Suisse mints these bars in Zurich, Switzerland. They have minimum purity levels of 99.99%.
Valcambi Gold CombiBar – These are 99.99% pure gold bars, and they can be split into 50 pieces, each piece weighing 1 gram.
How to invest in IRA Eligible Gold?
You must follow specific IRS regulations when investing in a gold IRA. To begin, you must purchase IRA-eligible gold and select an IRS-approved custodian who will ensure that your gold meets the regulations. Furthermore, any gold in a gold IRA must be kept in an IRS-approved depository.
Gold IRA companies can help you with the entire procedure, from selecting a custodian to arranging for precious metal storage. You can look up terms like “gold IRAs” or “self-directed IRAs.” You should be aware that there may be a minimum investment requirement as well as fees for account setup, shipping, storage, and maintenance.
What are the benefits of investing in IRA Eligible Gold?
Adding some IRA Eligible Gold shine to your IRA may provide various benefits, including:
Tax-deferred growth: Gold IRAs, like traditional IRAs, provide tax-deferred growth on earnings, and contributions are tax-deductible. Similarly, you can take tax-free distributions from your Roth IRA.
Long-term asset: Because gold is frequently maintained as a long-term investment, it is an excellent choice for a retirement account that will be grown for many decades.
Provides a hedge: Gold is thought to have an inverse relationship with the value of the dollar. When the value of the dollar falls, the value of gold tends to rise, and vice versa. As a result, including a gold IRA in your retirement portfolio could work as a hedge against inflation.
How much should you invest in IRA Eligible Gold?
Gold IRAs, like traditional IRAs, require contributions. If you are under the age of 50, the most you may contribute is $6,000 per year. The annual cap increases to $7,000 for individuals over the age of 50.
Many investing experts recommend allocating no more than 5% to 10% of your portfolio to gold. While gold can diversify your portfolio and give inflation protection, it can also be volatile. Before making any investment, carefully examine the advantages and downsides and consult with your investment advisor.
Should You Invest In IRA Approved Gold?
The benefits of investing in IRA-approved gold in an IRA, are tremendous. Unlike a 401k, you won’t be dollar-backed, so the depreciation of the currency won’t affect you detrimentally.
Back when I used to help my clients with their retirement portfolios, we would often turn to platinum and gold when the dollar started to fall. It is a common pattern among investors, and when this happens, the value of gold increases as more people flock to buy it.
Gold IRA essentially makes your IRA immune to the inflation of paper currencies. While also giving you significantly more bang for your buck. Analysts speculate that gold might reach $5,000/ounce before 2030.
Unlike paper currency, there is a minimal amount of gold in the world, scientists have estimated within the coming 20 years, all the discovered gold deposits will be fully mined. It is the best time to hold gold as a retirement investment and an asset.