Portfolio holders can proactively prepare for their retirement by taking advantage of the protection and performance that precious metals potentially offer.
A number of physical gold, silver, and other precious metals products can be held in a tax-advantaged self-directed individual retirement account (IRA) — a type of account that allows you to include a wider variety of assets than a conventional IRA does, ranging from commercial real estate to precious metals coins, bars, and rounds. However, according to the IRS, precious metals products must possess a certain purity level to be included in an IRA. Gold items, for instance, must have a fineness of at least 0.995 (Gold American Eagle coins are an exception to this rule and are allowed for inclusion in IRAs)
Self-directed precious metals–backed IRAs generally provide the same tax benefits as conventional IRAs. For example, as with any traditional IRA, the funds in a self-directed traditional IRA are deposited on a pretax basis, with taxes deferred until you begin taking distributions. The difference is that with a self-directed IRA, those funds can be used to purchase assets like physical gold and silver — which you would then have the option of either liquidating or receiving directly as a distribution-in-kind once it’s time to take distributions.
You can also hold gold assets in another type of retirement account called a self-directed Roth IRA. As with other Roth IRAs, contributions to this type of account are made on a post-tax basis, essentially equating to tax-free withdrawals. Unlike traditional IRAs, though, Roth IRAs carry eligibility requirements and are not available for those whose income exceeds a certain threshold. You may wish to consider a self-directed Roth IRA if you expect you’ll eventually become ineligible to make contributions or anticipate having a higher tax rate during retirement than your current rate.
Gold, when included in a portfolio, can act as an anchoring, stabilizing influence, according to U.S. Money Reserve President Philip N. Diehl, who previously served as the 35th Director of the U.S. Mint.
“Often, [gold] performs well during periods of strong economies,” Diehl says. “We saw that over much of the last 20 years, where gold has continued to rise during periods of economic growth. It’s [also] really a standout asset during recessions and periods of political instability. For that reason, gold is often used as wealth insurance to offset losses in other parts of a portfolio during hard times — when gold prices are stable or tend to go up.”
Initial IRA Steps
If you’re interested in adding precious metals to your retirement portfolio and don’t already have a self-directed IRA, you’ll need to fill out paperwork to set one up.
U.S. Money Reserve can offer guidance throughout the process, including helping coordinate the establishment of your account with your new IRA custodian, which typically takes about 24 hours.
Once that step is complete, your U.S. Money Reserve Account Executive will reach out to help facilitate the funding of the account.
You can add money from a checking or savings account or by using funds from a preexisting retirement account, such as a Roth, SEP, or SIMPLE IRA; a 401(k), 403(b), or 457(b); a Thrift Savings Plan account; or a pension plan.
If you’re utilizing funds from a preexisting account, there are two methods you can use to add money to your new IRA account. You can either have the previous plan administrator move funds directly to the new account custodian in a transfer (funds moving from one account to another of the same type) or rollover (funds moving from one account to another of a different type), or you can choose to withdraw and receive funds from your previous custodian, which is known as an indirect rollover. You’ll need to deposit the funds in your new account within 60 days to avoid incurring any potential tax penalties.
After your self-directed IRA account has been funded, U.S. Money Reserve will contact you to help you select your desired precious metals. Your Account Executive can also arrange for the items to be delivered to a secure storage facility.
The IRS requires that any assets included in a precious metals–backed IRA be kept in a recognized financial institution or IRS-approved depository, such as A-M Global Logistics, U.S. Money Reserve’s preferred depository. Vaults must meet specific size, recordkeeping, and other criteria to be approved by the federal agency.
“Under the IRS rules, [portfolio holders] cannot store [precious metals] at home,” Diehl says. “That’s a really important fact for customers to understand because there have been precious metals companies that have suggested customers can purchase the gold, take possession of it, and still get the tax benefits of it being part of their IRA — and that’s simply not true. The gold must be stored in a licensed depository.”
Your precious metals will be shipped registered and fully insured to the storage facility of your choice. U.S. Money Reserve takes full responsibility for the order until it is received and fully accounted for by the depository.
Maximizing Your Precious Metals–Backed IRA
While your precious metals will be stored remotely, you have full ownership of the items and complete control over how they’re allocated in your portfolio.
You can choose to adjust the amount of one or more precious metals in your IRA at any time by directing your IRA custodian to add gold, silver, or other assets or to sell some of the assets held in the IRA.
Once you have reached the eligible age — typically 59½ or older — you can begin to take distributions from the account.
As with other types of retirement accounts, portfolio holders can choose to take distributions from their precious metals–backed IRA before reaching the eligible age. However, if they’re younger than that age, they should be aware, Diehl says, that additional fees may be incurred.
“It is possible [to take distributions early],” Diehl says. “However, that makes them subject to the tax rules of the IRS and can subject them to early withdrawal penalties, so it’s always a complicated decision to do that. But after you reach retirement age, you can take possession of the gold when you’re ready to.”
When you’re ready to start taking distributions from your precious metals–backed IRA, you can choose to take them as cash or in the form of your precious metals as an in-kind distribution. If you select the latter option, the depository storing the assets on your behalf will send them to you.
If you opt to take an in-kind distribution, you can do whatever you’d like with your precious metals after you receive them — liquidate them for cash, for example, or hold on to them and pass them down to members of your family.
To find out more about establishing a precious metals–backed IRA — and learn about U.S. Money Reserve’s available inventory of government-issued bullion, high-purity bars, and certified coins — call 1-888-356-7074. Additional information is also available on U.S. Money Reserve’s website.