Precious Metal IRA Rules And Regulations
The Internal Revenue Service (IRS) enforces a number of rules in order for investors to keep gold and other precious metals in an IRA. The regulations fall under the terms of the Taxpayer Relief Act 1997 which allows bullion to be used as a self-directed IRA retirement instrument.
In the main, Gold IRA’s are subject to the same rules and regulations as traditional IRA’s. The only difference is that a Gold IRA permits investors to add gold, silver, platinum and palladium. However, before investors are entitled to add precious metals to an individual retirement account (IRA), the following rules must be satisfied.
Custodial storage
Gold and other bullion are classed as “collectables” and the law ordinarily discourages holding collectables in an IRA. However, the 1997 legislation makes an exception for certain “highly refined bullion” providing the physical assets are in the possession of a certified custodian such as a bank or IRS-approved trustee.
Gold IRA’s can therefore only be opened by an administrator that is authorised to handle a precious metals IRA. The custodian is responsible for storing the gold on your behalf together with buying precious metals and transferring the assets to their safe-storage facilities.
Quality specifications
The IRS only allows investors to store bullion coins and bars that meet the following criteria:
- Gold – 99.5% fineness (24 karats) with the exception of the American Eagle which is 91.7% (22 karats).
- Silver – fineness of 0.999
- Platinum – 99.95% pure
- Palladium – 99.95% pureness
To help ensure investors only add bullion that qualifies as a non-collectable to an IRA, the IRS has published a definitive list of coins and bars which are permitted which you can find here.
Contribution limits
With the exception of rollover funds, contributions paid into a gold IRA are limited to annual deposits of $5,500 for investors aged 49 and below and $6,500 for investors that are 50 or older.
Precious Metal IRA rollover
Some Gold IRA plans permit account holders under the age of 50 and a half to rollover funds from a 401(k) plan whilst still in employment. You can also rollover funds from 403(b)s and traditional IRA’s. The IRS makes a distinction between rollover and transfer.
In a rollover, the funds from another retirement account are paid to the owner who then deposits the funds into a Gold IRA. Owners have 60 days to deposit the funds with an authorised custodian. If you do not complete the transaction within the required timeframe, the money is subject to a 10% tax penalty. Gold IRA rollovers are only permitted once a year. Transfers are direct thus not subject to the 60-day rule.
Precious Metal IRA rollover age limits
One of the advantages of opening a Gold IRA in the United States is that you are not taxed on deposits made into your account. Assets are only taxed when you withdraw money. The point of opening a Gold IRA is to plan for retirement and protect your earnings. The IRS has therefore set age limits on when investors are entitled to access funds held in a Gold IRA.
Account holders are not obliged to withdraw funds until the age of 70 allowing you to advantage of tax reliefs and bolster your savings. However, you are entitled to access your account from the age of 59 and a half. You can still make withdrawals before the qualifying age, but in doing so will be taxed on your withdrawal and issued with a 10% penalty.
Early withdrawal penalty exceptions
The IRS allows for a number of exceptions in respect of withdrawing pension funds before the age of 59½. Account holders that meet one of these qualifying criteria will not be penalised.
- The IRA owner becomes disabled for whatever reason
- The account holder is hospitalised and needs funds to pay for medical treatment
- Unforeseen unemployment which means you cannot cover the cost of insurance
- Substantial equal periodic payments
- The IRA owner or family member needs funds to pay for education
- To make at least a $10,000 downpayment on a first home
- If the IRA account holder dies, beneficiaries can withdraw the funds
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