Can you invest your IRA in gold? This is a good question that deserves a comprehensive answer. In a nutshell, you can. You should actually consider buying gold or silver in their solid form and have them stored in a vault. This way your purchasing power is fully protected. You only need to notify your IRA custodian about this desire. He/she will then make the necessary arrangements. Before taking the discussion further, it is good to have an understanding of IRAs. IRA is an acronym for Individual Retirement Account. This account allows you freedom to decide how you would like to invest your savings.
For Self-directed IRAs, the Internal Revenue Service's provisions allow you to make investments in form of gold. To find out whether you can go ahead, talk to your trustee or custodian. This is usually an investment firm, brokerage, or bank through which you opened your IRA account. If you do not have a self-directed account, you may have to open another one that complies with dealing in gold. Funds to the IRA account emanate from rollovers or personal contributions. Your custodian can guide you on the process. Whenever you are transacting, always ensure it is between trustees. This way, you never get to touch the money.
To what extent can you invest your IRA in gold? The gold you have chosen to invest in is supposed to be stored in a depository. The IRS does not allow you to physically possess gold or other precious metal invested in this account. In addition, custodians should not be linked to the depositories in any way. Service providers are also allowed to give recommendations on the best depositories. Fees related to the depository services are paid from the account. Not all forms of gold are acceptable. The only forms allowed are Buffalo or American Eagle gold coins. Their denomination does not matter. Only coins issued by the United States treasury are allowed by IRS.
Other than gold coins, you can also invest in gold bullions and gold related securities. These include mutual funds and gold mining stocks. The IRS allows both. Once your trustee makes the purchase, these precious metals will be shipped to the selected depository. What your custodian will be compelled to do is send you statements periodically showing the value after a certain period. Collectible coins are prohibited with an exception of those minted and issued by the Treasury Department.
With such stringent controls, can you invest your IRA in gold? You need to understand that you cannot buy gold and then deposit it into your IRA account. Account holders are only allowed to make contributions in form of cash up to a limit of $5,000 per annum. The same can also be through transfer of funds from another retirement plan recognized by the IRS. This is also known as rollover. Once you confirm that the money is available, you can instruct your custodian to make the purchase of gold coins. Dealing with gold, with respect to IRAs, is highly restricted. All the same, there is a window of opportunity which if properly exploited can shield you in times of economic depression.
If you take possession of the gold you have invested, the IRS will treat that as a distribution. You will be liable to pay taxes for it. By the same token, the coins should not have been pre-owned. The point here is not to make people shy away from having gold in their IRA accounts. These controls help to minimize self-dealing or manipulation by custodians. During inflation, the value of gold can either remain constant or increase. Unlike currency, gold does not fluctuate in value.