Friday, December 15

Gold in Your Ira? Read This First!

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You can own precious metals in any type of IRA and diversify your financial assets while sheltering them from taxation. Diversification and a tax shelter are both good things, as any gold broker will be happy to point out. But before you reach for the phone – or mouse – you should understand a few key points that sometimes get lost in the fine print.

            1. No Collectibles.

The tax code is all about encouraging productive investment, not indulging your love of baseball cards, coinage of the Roman Empire or whatever else you want lots of. So, collectible or numismatic coins are out for IRA purposes. If a coin’s value is largely based on its rarity, it becomes a forbidden collectible. If not, it’s an IRA eligible commodity. Your broker should be able to tell you which coins are which.   

            2. Storage in an Approved Depository

You cannot bury your gold in the back yard. It must be stored with an approved, third-party depository. To do otherwise constitutes a distribution, which constitutes a taxable event and defeats the point of the entire exercise. Problem: If your rationale for owning gold involves a breakdown-of-society scenario, physical access to your metal might be a deal buster.

3. Fees

Neither your gold broker nor the storage depository works for free – probably. Expect to pay for some combination of account set up fee, transaction fee, annual administration fee, storage fee, “IRA” fee – or whatever they choose to call it. The point is not to be quoted a low price on your metal only to lose your price advantage due to excessive fees. When you shop, compare the metal price plus all fees.

4. Metal Price? – Isn’t this about Gold?

The Taxpayer Relief Act of 1997 specifies that gold, silver, platinum and palladium are all eligible for favored IRA treatment as long as they are of suitable fineness or purity. That means more latitude for you because the price per ounce varies greatly among the precious metals. If you want to start out with relatively inexpensive silver and your broker doesn’t handle it – others do.

5. Must be a New Purchase

You say you already have gold and you like to taxproof it? Sorry, the law requires that any bullion or coin be newly purchased to qualify. The money used for the purchase can be old – but the metal must be new to you.

Those are the major pitfalls to be avoided. Obviously, Uncle Sam will have a record of your holdings and there was a little incident in 1933 when President Roosevelt nationalized all gold in the US. But short of such extreme events, precious metals in your IRA accounts can be both a neat diversification – and a money saving tax shelter. 

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