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Gold IRA Overview

Gold IRAs are becoming more prevalent among U.S. retirement account holders as inflation worries increase. Because precious metals are typically purchased as a hedge against inflation, companies that facilitate the sale of gold for IRAs, such as Capital Gold Group, are becoming more popular.

The instability of the stock market has also caused more individuals with retirement accounts to explore the option of opening a self-directed IRA that holds physical gold. Many people with IRAs are trading a portion of their retirement account into precious metals.

But only certain approved forms of physical gold, silver, platinum and palladium may be held in these specific accounts. Of these precious metals, gold may be the most popular choice, as it has increased in value by more than 150 percent in the last 10 years.

Because gold IRA firms recommend that their clients seek the professional opinion of an attorney, here are 8 questions you might be asked regarding a gold IRA account.

Is It Legal To Open A Gold IRA?

It is perfectly legal to invest IRA funds in certain forms of physical precious metals. 26 U.S. Code § 408(m)(3) describes what types and forms of precious metals can be held within an IRA.

Any coin that does not meet the requirements of this section is considered a collectible, and IRA funds cannot be used for the purchase of such coins. In order to keep the tax benefits of the gold IRA, an investor must be careful to only invest in approved precious metals.

Investors run into tax troubles when they invest in coins that do not meet the requirements of the code or when they store approved coins in a manner that does not comply with the code.

More information is available on the IRS website.

Can Retirement Account Holders Keep Their Gold IRAs At Home?

The short answer to this question is “yes.” The IRS has allowed investors to manage self-directed IRAs with checkbook control since the early 90s.

From the IRS website: “The law discourages the holding of collectibles in IRAs. There is an exception for certain highly refined bullion provided it is in the physical possession of a bank or an IRS-approved nonbank trustee. This rule also applies to an indirect acquisition, such as having an IRA-owned, Limited Liability Company (LLC) buy the bullion.

Who Can Be A Gold IRA Custodian?

The tax code requires that the IRA have a custodian, even if it is a self-directed IRA. With a self-directed IRA, such as a gold IRA, the investor manages and directs all investments, but does so by instructing the custodian.

The custodian can be a bank, a savings and loan association, a federally insured credit union, a trust company or an IRS approved entity, so long as that custodian is willing to allow physical precious metals investments.

Can IRA Holders Store Gold In A Safe Deposit Box?

They most certainly can! All the IRS requires you to do is provide a simple document showing your precious metals are stored in a safe location under the LLC name you choose. This fulfills a provision in the U.S. Trustee required to own a Home Storage Precious Metals IRA.

Can Previously Owned Gold Be Put In An IRA?

No. Any gold that an investor owns outside of the IRA cannot be contributed to a gold IRA. Instead, the investor would have to sell the gold, contribute the money from the sale to the IRA, and then buy gold with the money once it is in the IRA.

Are Gold Transactions Reported?

When an investor makes a purchase or sale, the gold company will normally keep a record of it. Not all sales are to be reported to the government as there are certain criteria related to the size and nature of the product. However, an investor must submit a valuation of the gold IRA on an annual basis.

Can The Federal Government Seize The Gold?

Some companies play on consumer fears of government confiscation of gold. There is precedent for this, as in 1933, President Franklin Roosevelt signed the Emergency Banking Act, which required gold owners to relinquish their gold.

Nobody can predict the future or whether such a scenario can again occur. However, investors should be wary of companies that use any excessive fear tactics in marketing materials. Instead, investors should remain focused on what can be controlled and on whether investing in gold makes sense in the context of the investor’s overall portfolio and risk tolerance.

Are There Fraudulent Gold IRA Companies?

As in any other industry, there are scams here too. The Securities and Exchange Commission’s Office of Investor Education and Advocacy (OIEA) and the North American Securities Administrators Association (NASAA) recently issued an alert to warn investors of the risks associated with investing through self-directed IRAs.

NASAA says that the number of reports against fraudulent investment schemes has increased in recent times, with self-directed IRAs being a key feature offered by such companies. Self-directed IRAs can be useful. But the organization has found a number of cases where a self-directed IRA was used to lend authenticity and credibility to a fraudulent scheme.

An investor should be advised to vet any company they consider doing business with. This may include checking that the company is validly organized and in good standing with the state, finding out how long the company has been in business, and checking reviews left by consumers who have had actual experience with the company.

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