Last Updated on November 23, 2020
IRA Financial’s Adam Bergman Esq. discusses how to use your retirement account to purchase gold and other precious metals and how to correctly hold them so you remain within the IRS rules.
In this Podcast
Gold and other precious metals are popular alternative investments for retirement plans. One of the main reasons is during times of economic uncertainty, metals tend to keep their value, and even increase their value. This has been the case during the current COVID-19 pandemic and subsequent economic turmoil. Further, with the election looming, gold is seen as a safe alternative to stocks and mutual funds.
One thing to keep in mind is that not all retirement plans allow for alternative investing, such as gold. Therefore, if you wish to invest in nontraditional assets, you need to self-direct your retirement plan. The most popular plan is the Self-Directed IRA. Anyone can open and fund an IRA, assuming you have earned income. The IRS code allows you to invest in most types of precious metals, assuming they are not considered collectibles. However, if you do use a Self-Directed IRA to invest, you must know how to hold the metal.
Essentially, you cannot hold your IRA gold investment personally. It’s not like the old days, where you can take some gold and throw it in the safe in the closet. You are prohibited from the “physical” possession of the gold. It’s against the IRS code. The gold must be held by a trustee, such as a bank, credit union or trust company. These facilities are regulated, unlike your home.
Never believe anything you hear that says you can hold your precious metals at home. Just as IRC 408 says, you cannot hold the gold. But what about a safe deposit box in the “physical possession of a bank?” It seems like that should be okay, right? It certainly satisfies the condition of the code. However, you are in control of that box, so technically yours. Therefore, it’s not recommended to hold your gold in a safe deposit box. It’s possible to put the box in the name of your LLC, which is owned by the IRA. Again, there’s still risk about using the safe deposit box.
When using a retirement plan, such as a Self-Directed IRA or Solo 401(k) plan, to invest in gold and other metals, you should not possess them personally. Whether it’s metal bars or IRS-approved coins, make sure they are held with a trustee.
Gold is a great way to diversify your retirement portfolio. Of course, don’t put everything you own in one type of asset class. Holding different types of investments help you in case one asset starts to fall. It’s the same for any type of investment really. You don’t want 100% of your IRA or 401(k) invested in the stock market or one real estate venture, etc.
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Join us next episode as Mr. Bergman discusses the different types of self-directed retirement plans and how to choose the best one.