Gold IRA rules

Your financial adviser may have suggested that you invest in a gold investment retirement account. Take note that by doing so you are investing in precious metals—gold to be exact. Just like with any kind of investment, it is important to understand the Gold IRA rules before you add it to your portfolio.


Who Can Invest in an IRA?

An Individual Retirement Account (IRA) is the account that people use to save for their retirement. It is also used for investments that are intended to increase one’s retirement fund.


So, who can invest in an IRA? The short answer is that almost anyone can do so. The more detailed answer is that it depends on the type of IRA that you intend to invest in.

Types of IRA

The following are the types of IRAs. It is quite likely that you are already invested in at least one type of IRA. You can actually rollover a portion of your IRA funds to a Gold IRA account.

  • Simple IRA
  • Traditional IRA
  • SEP IRA
  • Roth IRA

To invest in a Roth IRA account, you need to have a modified adjusted gross income of $184,000 or less. This is a requirement for married couples. For unmarried single individuals, they need to have it at $117,000 or less.


If you are a small business owner or self-employed, then you can open a SEP IRA or Simple IRA account. Note that if you already have a SEP IRA or a Simple IRA, you are not allowed to have a Roth IRA account. If you have a side job or you do freelance gigs outside of your regular employment or business, you are allowed to setup a SEP IRA.

Your Administrator Matters

Note that some IRA administrators may not be able to accommodate Gold IRA such accounts. In case you created an IRA account with an administrator that cannot facilitate Gold IRA, you will have to set up a separate account with an administrator who can do it for you.


Remember that even with a precious metals IRA account, you will never be able to directly buy the actual precious metals, including gold, personally. In short, you can’t directly exchange money for the actual gold bullion or gold coins that they are holding in the gold reserves.


According to IRS rules, your administrator will be the one who will execute the transaction on your behalf. These administrators will perform these actions and act as custodians of your interests. Note that this somewhat a similar setup in the stock market where stockholders do not transact directly with stock market exchanges but instead you have brokers who execute the buy or sell orders on their behalf.

Rolling Over Funds

Here’s an example of how you can roll over your funds. If you already have a 401(k) or a Roth IRA, for instance, then you are allowed to roll over portions of your funds from these accounts to a Gold IRA account. The rollover follows the same process as you would for any other retirement fund.


To roll over a portion of these funds, you need to fill out an application form (i.e. transfer request). This can be accomplished online or on paper. After you have submitted this form, you can expect your Gold IRA account to be opened within 24 to 48 hours.


Copies of your transfer request will be provided to the administrator of your Roth IRA or 401(k) account and also to the new administrator of the Gold IRA account. You will then be informed of the precious metals options that are currently available at that time. You can specify the type of precious metals that you want to purchase, and once you give the order, the prices will be locked according to the time and gold prices that they have received it.


When You Can and Can’t Own Gold in an IRA

The answer to this question is the timing of your entry. You have to look at the trading signals to best judge when you can and can’t own one. The best time to buy and own gold in an IRA account is when the inflation is expected to bring down the value of currency.


This is because when you purchase your gold earlier, you have time to catch the wave of the price increase as investor interest in gold and precious metals increases. This action gives you more room to take profit.


Some of the other signals that you can look out for include the future devaluation of the nation’s currency, political turmoil, and stock market crashes. Those are the times when other investors would rush to buy gold thus increasing the demand and price of this and other precious metals.

Buy and Hold Strategy

You don’t always have to wait for the above mentioned trade signals to start moving your funds over to gold and precious metals assets. You can make small increments at a time.


There are financial advisors that suggest that there is actually no better time to get invested in gold than now. The current market has a bullish outlook even though gold prices have declined somewhat in recent years. Gold still is within its record highs since 2011.


Some speculate that the price of gold can reach up to $2,000 per ounce. That is why taking a buy and hold strategy via a Gold IRA account or some other form of investment is such a great idea.

Following the Trends

A Gold IRA is more appealing to investors who prefer to diversify their portfolio. If you have been left scared due to the stock market crashes and financial crisis that have occurred in the last decade or so, you may want to look into this type of IRA as a way to reduce the risk exposure of your retirement portfolio.


In its infancy, securing a Gold IRA will require investors to go through a rather complicated hurdle of a transaction. Back then, only the persistent investors were successful at getting one.


However, the great recession that occurred right after the 2008 financial crisis has changed things in the financial markets today. Nowadays more companies offer their services to simplify the transactions involved in setting up a Gold IRA. This has resulted in strong growth of the Gold IRA.


Conditions around the world and economic issues faced by many countries have lent to the popularity of Gold IRAs as a secure investment. Geopolitical risks along with the prominence of stimulus programs by the Federal Reserve have also increased the interest of many investors in this type of IRA.

How Much of Your Portfolio Should You Invest?

Experts recommend that you should invest around 1% to 5% of your total portfolio. That helps a great deal if you want to diversify your investments and reduce your risk exposure.


However, more people are seeing gold and other precious metals as a hedge against the tumultuous economies of the world. It’s almost like something big is going to happen every decade that will make stock markets and global economies come down crashing.


That is why investors are looking to increase their gold holdings to as much as 5% to 15% of their total portfolio. However, take note that gold currently is just a small proportion of a portfolio for many investors.

 
But that is about to change. If you’re still uncomfortable about making the switch to gold, then you can just take a position of about 1% to 2% of your portfolio just to help you dip your proverbial toes in the water so to speak. Note that with just that small increment, it will already have a great upside bearing on your investments.


Types of Precious Metals Approved by the IRS

The Taxpayer Relief Act of 1997 expanded on the allowed types of precious metals that can be used for retirement accounts. The types of precious metals allowed for a Gold IRA account include: gold, silver, platinum, and palladium.

Gold

The following are acceptable gold product examples for IRA accounts:

  • U.S. Buffalo bullion coins
  • American Eagle bullion
  • Austrian Philharmonic bullion coins
  • American proof coins
  • British Britannia (2013 & newer)
  • Australian Lunar Series coins
  • Credit Suisse – PAMPSuisse goldbars
  • Australian Kangaroo/Nugget bullion coins
  • Chinese Panda coins
  • Canadian Maple Leaf coins

Silver

The following are the acceptable products for this precious metal:

  • American Eagle bullion
  • American proof coins
  • Mexican Libertad bullion coins
  • British Britannia (2013 & newer)
  • Australian Kookaburra coins
  • America the Beautiful coins
  • Austrian Vienna Philharmonic coins
  • Chinese Panda coins

Platinum

The following are the acceptable platinum products:

  • American Eagle bullion
  • American proof coins
  • Isle of Man Noble bullion coins
  • AustralianKoala bullion coins
  • Canadian Maple Leaf bullion coins

Palladium

Canadian Maple Leaf coins are an example of acceptable palladium products.


Gold IRA Rules to Know Before Investing

CARES Act and IRA Rules & Regulations

The Coronavirus Aid, Relief and Economic Security (or CARES) Act is a piece of legislation that is aimed at helping the US economy to recover during the COVID-19 pandemic.


It has numerous provisions and is hundreds of pages long. Some of the important provisions of this law related to your IRA include the following:


Waiving of the required minimum distributions (RMD)
RMDs that have been taken will be returned to account holders
Removal of penalties for early distribution of gold assets and other funds


Re-contribution of distributed funds allowed over a three year period if those distributions were intended for coronavirus purposes


Relaxation of rules for IRA beneficiaries

General IRA Contribution Rules

Updates to the IRA contribution rules have been made since 2020. Here are some of the important updates that you should know about:

  • The annual contribution limit has been set to $6,000 for people age 50 and young, and $7,000 for those above 50.
  • You are now allowed to contribute to both Traditional IRA and Roth IRA in the same year.
  • You are also allowed to contribute to a 401(k) account and a traditional IRA in the same year.
  • You are allowed to contribute to your traditional IRA even if you’re not qualified to make deductible contributions.
  • There is no long a minimum required amount to open an IRA.

IRS Account Administrator Rules

You will be required by the IRS to open a Gold IRA account with an approved administrator. Some of these authorized administrators include retirement companies, banks, and insurance agencies.

 
Before you open an account with any of these administrators, you should first inquire whether they will be able to handle a precious metals IRA.


Your administrator will be the one who will execute transactions on your behalf. These administrators will perform these actions and act as custodians of your interests. Note that this somewhat a similar setup in the stock market.


In essence, you will be the one providing the directions or orders so that an administrator will make the purchases of these precious metals in your name. They will also be responsible for making transport arrangements, insurance, and shipping. All of these actions will be performed after your transactions.

IRA Tax Regulations

Here are some updated tax regulations for 2020 and onwards:

  • A retirement withdrawal is taxed as your ordinary income.
  • Any growth in your investments remains tax-deferred.
  • Contributions you make may be made tax-deductible in the same year that you made them.
  • Withdrawals from Roth IRA will follow taxation rules for Roth IRA.

IRA Retirement Age Limits

You will be required by the IRS to take money from your IRA account by age 72. You ate considered retired by age 60. If you turned 70 ½ in 2019, you will be required by the IRS to make withdrawals.

Withdrawal Gold IRA Tax Rules

The following are updated rules for 2020 and beyond:

1. Traditional IRAs
Withdrawals made before the age of 50 ½ will incur income taxes and early withdrawal penalties. You can avoid the penalties if you use the money to pay for medical insurance or paying for a first home.

2. Roth IRAs
Roth IRA withdrawals are tax deductible unless you make the withdrawal before you turne 59 ½ years old or if your account is less than 5 years old.

IRA Early Withdrawal Penalties and Penalty Exceptions

We have already covered early withdrawals, the penalties involved, and the exceptions to them in the previous sections.


Essential Rules for Investing in Precious Metals

The Gold IRA

For gold to be acceptable for an IRA account it must follow these specifications:

  • 99.5% pure
  • 1/ 2, 1/4, or 1/10th ounce U.S. gold coins
  • It must be produced by an accredited refiner, manufacturer, or a national government mint

The Silver IRA

The following are the requirements set by the IRS for silver precious metals:

  • At least 0.999% purity grade
  • It must be stored in an approved depository
  • Must be handled by a qualified custodian

The Platinum IRA

The following are the specifications for platinum:

  • 99.95% purity
  • It must be stored in an approved depository
  • Must be handled by a qualified custodian

The Bullion IRA

Bullions must be manufactured according to provided specifications by the IRS. They include the following:

  • Gold can either be in 100 or 400 ounces
  • Silver should be in 1000 ounces
  • Platinum at 50 ounce bars
  • Palladium at 100 ounce bars

Summary

Understanding the Gold IRA rules is important before you invest any amount of money in these precious metals. Remember that this is not an investment for everybody, but if you are qualified, then it may help you diversify your investment for your retirement.

Scroll to Top