IRA-Eligible Precious Metals can be game-changing for an investor as it provides more diversification to your portfolio. However, there are stringent regulations and rules regarding which precious metals are allowed in an IRA.
What is IRA Eligible Precious Metals?
The Internal Revenue Service (IRS) allows self-directed Individual Retirement Accounts (IRAs) to invest in physical gold, silver, platinum, and palladium. These are referred to as precious metal IRAs.
The IRS has laid out crystal clear rules for the purity of the metals and which metals can be allowed in an IRA.
The minimum purity levels required for each IRA Eligible Precious Metals are listed down below:
| Precious Metal | Required Purity Level |
|---|---|
| Gold: | 99.5%+ |
| Silver: | 99.99%+ |
| Platinum: | 99.95%+ |
| Palladium: | 99.95%+ |
Currently in 2022, the following gold, silver, palladium, and platinum coins and bars are safe to be part of your retirement investment portfolio.
What Is a Precious Metal IRA?
A Precious Metals IRA is a type of individual retirement account in which you invest in gold or silver coins/bars rather than stocks or bonds. A Precious Metals IRA, also known as a Gold IRA or Silver IRA, is a unique and powerful financial way that allows you to diversify your retirement portfolio beyond traditional assets.
This self-directed IRA provides you with a hedge against economic insecurity and market volatility by allowing you to hold physical precious metals such as gold and silver.
To open an account and acquire gold or silver, you must first select one of the prominent precious metals companies that will manage your account on your behalf. The following are the responsibilities of such a company:
- Purchasing the precious metals you’ve selected.
- Storing them in a secure, IRS-approved depository.
- Managing any transactions related to your account.
Essentially, precious metals IRA companies allow you to focus on your investing strategy rather than the paperwork and logistics of physically holding and managing your gold IRA investments.
Difference Between a Traditional IRA and a Precious Metals IRA
The fact that the precious metals IRA account is self-directed is one of its primary benefits. Unlike traditional IRAs, which often limit you to investing in traditional assets such as equities, bonds, or mutual funds, a self-directed IRA allows you greater flexibility in your investment options.
This allows you to create a personalised investing strategy that is in line with your financial objectives and risk tolerance. In the case of a Precious Metals IRA, you can select the type of precious metals to invest in, as well as specific coins or bars.
The precious metals in these IRAs are usually bullion coins or bars that meet specific purity requirements. For example, gold must be at least 99.5% pure, whereas silver must be at least 99.9% pure. Notably, platinum and palladium have been added to the list of acceptable precious metals, providing even more chances for diversification.
While having physical precious metals in your retirement account may sound appealing, it’s important to note that this type of IRA has drawbacks. These include storage costs for gold and silver items, potential tax issues, and the overall illiquidity of physical assets in comparison to traditional investments.
Popular Precious Metals & Coins Not Allowed In IRA
The list below contains the name of bars and coins which may be popular but are not eligible for IRA investing. These are very popular amongst collectors and precious metal investors. If your retirement advisor or precious metal dealer recommends you any of the following coins/bars (for IRA investing), then steer clear of them.
- Chilean Peso
- Columbian Peso
- Chinese Panda coins
- French Napoleon coins
- Israel Tower of David coins
- USSR Chervonet coins
- Somalia Elephant coins
- U.S. Liberty coins
- Dutch Guilder
- Hungarian Korona
- French Franc
- Italian Lira
- German Mark
- South African Krugerrand
- Mexican Peso and Onza
- Swiss Franc
- British Brittania (pre-2013)
- Belgian Franc
- British Sovereign
- Austrian Corona and Ducat
Collectibles Are Ineligible For An IRA
Although collectible coins are a good investment, they cannot be part of your IRA. You are held responsible for storing these coins and they are not approved by the IRS, mostly because of their usually low purity levels. And it is difficult to assess the value of a collectible accurately.
There are also consequences of purchasing unapproved coins/bars, the IRS is likely to consider it a withdrawal and you might be charged a 10% penalty if you are under 59.5 years of age.
Pre-1933 gold, 90% US silver coins, and gold Krugerrands are not IRA-Approved as well.
Frequently Asked Questions
Why should I opt for IRA Eligible Precious Metals over cheaper alternatives?
You can only use eligible coins and bars in an IRA. Any other coins/bars cannot be legally used and you might be fined by the IRS if you try to do so. Purity is also a factor, so cheaper alternatives (like 90% US silver coins) are not allowed in an IRA.
Can I use physical gold for my IRA?
Yes.
My dealer wants me to invest in collectible coins for my IRA, what should I do?
If your dealer asks you to buy collectible coins to “diversify” your portfolio, then please avoid them at all costs. They are a scammer. As the IRS does not allow collectible coins in an IRA.
Is there a penalty for using ineligible precious metals in an IRA?
There are consequences for purchasing unapproved coins/bars, the IRS is likely to consider it a withdrawal and you might be charged a 10% penalty if you are under 59.5 years of age.