In a world where it’s either cash or credit, not many people know that you can invest in gold through your self-directed IRA (Individual Retirement Account). But first, what is a self-directed IRA? A self-directed IRA provides an investment option for your retirement account, which means a broader scope in building an investment portfolio. Here’s what you should know about investing in gold as an IRA investment through a self-directed account.
Self-Directed IRA Investment in a Nutshell
Through a self-directed retirement account, investors can make alternative investments for their retirement fund. This means a more extensive scope in building an investment portfolio inside an IRA account.
Through a self-directed retirement plan, you can invest in the following:
- private company stock
- private mortgages
- real estate IRA
- oil and gas partnerships (limited)
- intellectual property
- precious metals, such as gold coins, gold futures, gold bullion and gold funds
With the exception of certain assets such as:
- life insurance
Before, investing in gold meant purchasing gold jewelry. Although Gallup’s April 2017 poll shows a much lower ranking than in 2011, investors still believe in gold as the best way for long-term investment other than stocks, a self-directed IRA real estate, a mutual fund, and a tax lien among many others.
You can have either the self-directed Roth IRA and the self-directed Traditional IRA for your gold investment. But the biggest difference between the two is how the IRA is managed and the range of investments offered.
You can invest in gold in several ways through a self-directed IRA. However, the IRS classifies it only into two:
- physical gold investments
- gold securities
Investing In Physical Gold
You can invest in physical gold, such as coins or bullion. However, the IRS is very specific about the storage and what type to own through a self-directed IRA account.
As defined by the IRS Section 408, self-directed IRA investors can only invest in physical gold with a purity rating of 99.9% or better:
- American Gold Buffalo coins
- American Gold Eagle coins
- Canadian Gold Maple Leaf coins
- gold bullion
As for the storage, gold bullion shall have an approved trustee which can either be a bank, a credit union or a corporation that follows a state banking regulation. This is also the same with gold coins.
However, there is an exception for self-directed IRA under a Limited Liability Company (LLC). Technically, these coins can be kept in a safety deposit box at the bank, instead of turning it over to a trustee. However, as per the IRS, you can’t keep gold at home through a private safe.
Practical Steps on How to Invest in Gold Using a Self-Directed IRA
1. Gather Information
The first step to investing in gold through a self-directed IRA is by gathering enough information, especially if it is your first time. This is necessary because the process of investing in gold is different than other investments. If you still have questions or concerns, you can also talk to the experts, such as a Financial Advisor or you may contact your local IRS office.
2. Choose a Custodian
The next step is to choose a custodian or approved trustee. This can either be a bank, a credit union, or a corporation that follows a state banking regulation.
Some self-directed IRA custodian options are as follows:
- Mountain West IRA
- New Direction IRA (NDIRA)
- Ramsey National Bank
- Equity Institutional
- IRA Services
- Millenium Trust
- Kingdom Trust Company
3. Acquire an IRA Funding
If you don’t have an IRA yet, you can fund your IRA by making transfers, contributions, and rollovers from your existing retirement plans. Also, the minimum required investment is $5,000 to begin your IRA and start investing in gold.
Having a checkbook control in your self-directed IRA through a checkbook IRA LLC can also be an advantage for your gold investment inside your IRA. Checkbook control refers to the ability of the self-directed owner to have total signing authority over his/her funds for retirement.
Another option is through non-recourse loans. Non-recourse loans can also be another option for making purchases with all-cash through a self-directed IRA. The traditional recourse loans are not available for making investments inside the IRA or (401) k plans
4. Select the Type of Gold to Invest In
You can invest in gold and be a self-directed investor in two ways: physical gold investments and gold securities.
Self-directed IRA investors can only invest in the allowed gold as follows:
- American Eagle coins
- U.S. Buffalo Bullion coins
- Canadian Maple Leaf coins
- Austrian Philharmonic coins
- Australian Kangaroo/Nugget coins
- Credit Suisse – Pamp Suisse Bars
- Various bars and rounds .995
You can also avail the services of a precious metals dealer if you want further assistance, especially if it is your first time.
5. Know the Limitations
When investing in gold through self-directed IRA, graded/slabbed “rare” coins are allowed, but they have high investment complexities and are usually poor investments.
Also, as defined by the IRS Section 408, self-directed IRA investors can only invest in physical gold with a purity rating of 99.9% or better.
6. Finalize Your Gold Investment Plan
Before purchasing, make sure you’ve checked in with an IRA financial advisor, an IRA financial group, or your custodian on which type of gold investment will best suit your IRA needs.
7. Start Making Your Gold Purchase
To finish your gold transactions, pay for the type of gold you want to purchase and invest in. Once paid, your gold investment will be available for pick up or will be shipped from a precious metals dealer, if you availed of their services.
Watch this clip from sunwestira for more information on how to use a self-directed IRA for gold:
Investing in gold is made easier through a self-directed IRA and by being a self-directed investor. Like any other investment, investing in gold also entails investment complexities and challenges. Though its price in the market is volatile, it can still be one suitable investment to add to your retirement nest. It is also advisable to consult with a custodian or an Investment Advisor on which type of gold best suits your needs and preferences.
Are there other tips you can share on using a self-directed IRA for gold? Share it with us in the comments below!
Editor’s Note: This post was originally published in September 2017 and has been updated for quality and relevancy.